PSU stocks have been showing outperformance in the last two years, compared to the market benchmark BSE S&P Sensex. These are the companies which makes the PSU Index :
ICICI Prudential Mutual Fund has launched a PSU Equity Fund, which will invest in government-owned companies on the stock exchanges. The new fund offering (NFO) opened on August 23.
ICICI Prudential PSU Equity Fund will invest 80 percent of its corpus in PSU stocks, as per the SEBI-prescribed limit for thematic funds. In the remaining 20 percent, the fund manager will have the flexibility to look for opportunities beyond the investment theme.
The Fund Manager , Mr Kalawadia says there are clear opportunities in PSU banks and power sector. “In the last three-four years, PSU banks had lot of issues. They had to write off several bad loans from their books. Now, corporates have also significantly deleveraged their balance sheets and are in better financial position. So, across the board there is not much of NPA issues. Apart from this, rising interest rates and improvement in credit growth will improve their net interest margins,” points out Kalawadia in one of his comment to Moneycontrol.com
On the power segment, Kalawadia says that this is another sector which has been out of favour, but as we see power deficits widening during peak hours, this sector is bound to grow to bridge this deficit.
Experts say that PSUs can be a good tactical allocation. “PSUs offer higher dividend yields, which will be more tax-efficient when accrued through the mutual fund route. There is also a general election in the next two years, and historically PSU stocks tend to do well around this period,” says experts
Further, the capex cycle is expected to improve, which should benefit sectors such as energy, metals, PSU banks, logistics, capital goods, etc, where PSUs have large presence. Favourable government policies such as production-linked incentive scheme and global tailwind from China Plus One policy (i.e. global businesses looking to diversify their supply chains beyond China) should spur capex cycle growth.
The NFO is closing on 6th September 2022. This is a a good investment option for Investors looking for High Risk - Reward proposition.
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