PSU funds: From much-hated to much-loved

Since March 2014, the BSE PSU Index has surged by 61 per cent.

The index was in a lull between October 2010 and August 2013, when public sector firms were beaten down to rock-bottom valuations.

Bargain hunting from September onwards propelled interest in public sector companies once again. Moreover, this rally has had a ripple effect on PSU funds.

With the markets giving a thumbs-up to government undertakings on hopes that the new regime would revive their fortunes, there was an upswing in the segment even a couple of months before their results season.

Over the past one year, these funds have delivered about 36 per cent returns, which is 4-5 percentage points better than what the Sensex or the Nifty managed.

All the PSU funds have a track record of less than five years. Most of them have beaten the BSE PSU index over the past three-year period by delivering an average return of 3.6 per cent over the index return of 0.9 per cent.

But in the last one year Baroda Pioneer PSU Equity Fund - Plan A has outdone the benchmark index’s return of 37 per cent by delivering 43 per cent.

Three other funds have underperformed the BSE PSU index. Religare Invesco PSU Equity, which has outperformed peer funds over three years, is among the lower performers over the one-year period.

For all the funds, exposure to the stocks of companies such as ONGC, HPCL, Coal India and NTPC helped returns.

Power and mineral companies too found favour. In addition, stakes were also increased in the banking space to players such as SBI, BoB, UBI and PNB, among others, which rallied strongly over the past couple of months. Other favoured stocks include NMDC and SCI as the bet was on a sustained economic recovery.

Baroda Pioneer PSU Equity Fund - Plan A took exposure to banks, oil, mineral and power, allocating 73.5 per cent of its portfolio to such segments.

Religare Invesco PSU Equity too was overweight on sectors such as banks, power, oil, mineral, petroleum products and gas over the past one year.

The fund exited GMDC, NMDC, Corporation Bank and Dena Bank over the past one year. On the other hand, Gujarat State Petronet, NALCO and Power Finance Corp got berths in the portfolio.

SBI PSU fund too played the trend well, betting mostly on winning stocks. Oil India and Power Grid Corp aided its performance. Sundaram PSU Opportunities churns its allocations constantly.

Energy, Financial Services and Metals are the top preferred sectors with an allocation of 80 per cent of its portfolio.

COMMENT NOW