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10 Top Funds and Their Exposure to PSU Banks

10 June 2022

State-owned banks or Public Sector Undertaking (PSU) banks are under the spotlight recently. The country’s second largest public sector lender, Punjab National Bank (PNB), is in the middle of a ₹ 11,400 crore case of fraud transaction, and every day new fraud is revealed.

Banking and PSU Funds are investment options available in Mutual Funds. These funds invest in the stocks of public sector units (PSUs) and banks. The return on these investments can be higher than that of other non-equity mutual funds. In addition, the risk is lower since these funds invest in relatively stable companies.

Banking and Public Sector Undertakings (PSU) funds are the two most common types of funds. These funds are often used by investors who want to invest in bonds, which are debt securities that pay interest periodically over a set period of time. Bank funds are typically considered safer investments than other types of funds because they have a lower risk of defaulting on their payments. 

Top Banking and PSU Funds

Let's see the 10 most popular public sector mutual funds in every category and their exposure to PSU banks.

S.No.

Fund Name

Fund Category

1.

Nippon India Large Cap Fund

Large Cap Fund

2.

Mirae Asset India Opportunities Fund

Large Cap Fund

3.

SBI Bluechip Fund

Large Cap Fund

4.

L&T Midcap Fund

Mid Cap Fund

5.

Mirae Asset Emerging Bluechip Fund

Mid Cap Fund

6.

HDFC Small Cap Fund

Small Cap Fund

7.

L&T Emerging Businesses Fund

Small Cap Fund

8.

DSP BlackRock Opportunities Fund

Multi-Cap Fund

9.

Motilal Oswal Most Focused Multicap 35 Fund

Multi-Cap Fund

10.

Nippon India Equity Hybrid Fund Growth

Hybrid Cap Fund

Factors To Consider Before Investing In Mutual Funds

Investing in Banking and PSU Funds is a great way to diversify your portfolio. It's also a good way to get exposure to these stable companies if you're interested in investing but don't want to put too much money at risk. Here are some factors you should consider before investing in mutual funds:

  • Financial Goals

The main goal of investing in a bank fixed deposit or a PSU fund is to secure a stable income for your future. The income from these investments can be used for retirement, for children's education, or for any other purpose.

  • Investment Horizon

You should invest in a bank fixed deposit or a PSU fund only if you have a long-term investment horizon. If you have short-term goals, it will be better to invest in liquid funds or debt funds.

  • Returns

The returns on fixed deposits and PSU funds are low compared to equities, but they are safe and secure. If you want higher returns, you can invest in equity funds that are riskier but also offer higher returns. When determining how much money you should be putting into your investments, it's important to calculate what kind of return you can expect throughout your investment horizon. This will help determine how much risk is appropriate for your portfolio and what kind of returns you may expect from it.

  • Taxation

You also want to consider taxation when investing. Different types of investments have different tax treatments, so you must understand what taxes apply to which investments to make smart decisions about how much risk is appropriate for your portfolio given the tax consequences associated with each type of investment.

Top Banking and PSU Funds: Performance Overview

1) Nippon India Large Cap Fund

Nippon India Large Cap Fund-Growth is an Equity Mutual Fund Scheme launched by Nippon India Mutual Fund. This scheme was made available to investors on 30 Jun 1995. The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity-related instruments of large-cap companies. 

2) L&T Midcap Fund

L&T Midcap Fund Growth is an Equity Mutual Fund Scheme launched by L&T Mutual Fund. This scheme was made available to investors on 25 Apr 1996. The scheme aims to generate capital appreciation by investing primarily in midcap stocks. The Scheme will invest primarily in companies whose market capitalization falls between the highest and the lowest constituent of the Nifty Free Float Midcap 100 Index.

3) HDFC Small Cap Fund

HDFC Small Cap Fund Regular Growth is an Equity Mutual Fund Scheme launched by HDFC Mutual Fund. This scheme was made available to investors on 10 Dec 1999. The scheme seeks to provide long-term capital appreciation /income by investing predominantly in Small-Cap companies. 

4) DSP BlackRock Opportunities Fund

DSP Equity Opportunities Fund-Growth is an Equity Mutual Fund Scheme launched by DSP Mutual Fund. This scheme was made available to investors on 16 Dec 1996. The minimum SIP investment is set to ₹500. Exit load of 1% if redeemed less than 12 months. 

5) Nippon India Equity Hybrid Fund Growth

Nippon India Equity Hybrid Fund Growth is a Hybrid Mutual Fund Scheme launched by Nippon India Mutual Fund. This scheme was made available to investors on 30 Jun 1995. The minimum SIP investment is set to ₹100. 

The scheme aims to generate consistent returns by investing a major portion in equity and a small portion in debt and money market instruments. It will invest up to 50 percent of its assets in equities and equity-related securities and at least 25 percent of its assets in debt and money market instruments with an average maturity of 1 to 7 years. 

Conclusion

If you are a beginner at investing in mutual funds, especially equity mutual funds, thinking of the small/mid-cap mutual funds may not be the best idea for you. These are best for investors who have very good ideas of mutual funds and the risks associated with them.

If you want to invest in mutual funds, then make sure you are familiar with the various risks and essential requirements before you begin. By keeping such investment tips in mind, you will definitely be able to increase your savings – as well as these returns – at the end of the financial year. 

To ensure that the fund is in good hands, choose a fund house having a fund manager with a good amount of experience managing small/mid-cap funds and associated with these funds for a good number of years.

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

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Research Analyst - Bavadharini KS

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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