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Aditya Birla Sun Life AMC Limited

Aditya Birla Sun Life AMC Limited

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    Aditya Birla Sun Life AMC Limited

    What Are PSU Stocks? How To Invest In It Through Mutual Funds

    May 23, 2024
    5 min | Views 365

    Are you an investor looking for a reliable long-term wealth creation channel in the Indian stock markets? If so, you might have come across Public Sector Undertakings (PSUs). Once you understand their fundamental role in steering entire industries and building vital infrastructure, you'll see why they are indispensable for advancing India's sustainable national prosperity goals.

    This article covers the factors around investing in PSU stocks rationally through stepped guidance, summing up critical considerations prudently before committing hard-earned savings.

    What is PSU Stock (Public Sector Undertakings)?

    PSU stocks are public sector undertakings, incorporated entities in which the government holds over 50% of the controlling ownership stake to serve citizen needs in areas such as energy, finance, transport, and resources.

    PSUs receive budgetary support and have expanded and reached underserved sections over decades through process refinement and accruals. Evaluating PSU's performance requires customised lenses that align financial and socio-economic value creation parameters ethically. .

    Investing in PSU Stocks

    Here are key points to consider before investing in PSU Funds:

    1. Government Disinvestment: The government sets targets to reduce its stake in PSUs, aiming to revive these companies with private sector participation and efficiency.

    2. Economic Indicators: Since PSUs are intertwined with the economy's core sectors, monitoring broader economic indicators can offer insights into their performance.

    3. Stability and Dividends: PSU stocks are known for their relative stability and attractive dividends, making them appealing to those who aim at seeking steady returns.

    4. Capital Appreciation: While offering relative stability, PSU stocks may not always match the capital appreciation seen in some private sector stocks.

    The Financial Autonomy of Central Public Sector Enterprises (CPSEs)

    Central Public Sector Enterprises (CPSEs) are categorised based on their financial autonomy, influencing their operational freedom and investment capabilities.

    • Maharatna Stocks

      Maharatna companies enjoy significant autonomy by being allowed to make large investments without government approval. This status facilitates skill and global competitiveness.

    • Navratna Stocks

      With more operational flexibility than Miniratnas, Navratna companies have proven their efficiency and have earned autonomy in investment decisions, although with certain limits.

    • Miniratna Stocks

      Miniratnas are granted financial autonomy to promote competitiveness and efficiency. They are divided into Categories I and II, with varying degrees of investment freedom.

    Portfolio & Sector Holdings of ABSL PSU Equity Fund

    Understanding the distribution of investments across different PSUs can give investors a glimpse into where the government is channelling resources.

    Below is the table of the portfolio and sector holdings for Aditya Birla Sun Life PSU Equity Fund:

    Company Name

    % of Net Assets

    State Bank of India

    9.29%

    NTPC Ltd.

    8.06%

    Oil & Natural Gas Corporation Ltd.

    7.11%

    Bank of India

    5.89%

    Power Grid Corporation Of India Ltd.

    5.47%

    Coal India Ltd.

    5.29%

    Bank Of Baroda

    5.20%

    GAIL (India) Ltd.

    5.12%

    Indian Renewable Energy Development Agency Ltd.

    3.34%

    Bharat Heavy Electricals Ltd.

    3.22%

    Holding as on 21st May’24
    Note - The sector(s)/stock(s)/issuer(s) mentioned do not constitute any research report/recommendation of the same and the Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s).

    How To Invest Through Mutual Funds?

    1. Choose Investment Scheme

      One should first select the mutual fund scheme they wish to invest in that aligns with their financial goals and risk tolerance. Review historical returns across debt, equity, and hybrid schemes.

    2. Fill Application Form

      After scheme selection, one must complete the application form to purchase units in their chosen investment. Forms can be downloaded online or collected from a branch.

    3. Submit Requisite Documents

      Signed application forms must be submitted along with a copy of the PAN card, proof of address, and investment cheque to an official point of acceptance. Investments over Rs 50,000 require KYC documentation submission additionally for processing.

    4. Track Investment Progress

      One can then track their investment's progress by logging into their investor dashboard through the asset management website. Online accounts detail capital invested, returns accrued, units allocated, and more for monitoring growth.

    5. Redeem or Exit

      When wishing to redeem units or exit one's investment, a redemption form must be filled out and submitted outlining the payout amount and bank details for hassle-free encashment processing.

    Aditya Birla Sun Life PSU Equity Fund:

    Aditya Birla Sun Life PSU Equity Fund is an open-ended equity scheme that primarily invests in PSU stocks. The fund aims to provide long-term capital appreciation by investing in equity and equity-related securities of Public Sector Undertakings. The fund is managed by a team of experienced professionals who follow a research-driven investment approach to select high-quality PSU stocks with the potential for long-term growth.

    Why Invest in Aditya Birla Sun Life PSU Equity Fund?

    • Diversified Portfolio: The fund offers a diversified portfolio of PSU stocks, reducing the risk associated with investing in individual stocks.

    • Expert Management: The fund is managed by experienced professionals who have a deep understanding of the PSU sector and the companies within it.

    • Potential for Growth: PSU stocks have the potential to deliver stable returns over the long term, making them an attractive investment option for conservative investors.

    Conclusion

    Investing in PSU stocks through mutual funds like the Aditya Birla Sun Life PSU Equity Fund can be a prudent way to gain exposure to this sector while mitigating potential risks. However, it is essential to consider your investment goals, risk tolerance, and investment horizon before investing in any mutual fund. Consulting with a financial advisor can help you make informed investment decisions tailored to your individual financial needs.

    Aditya Birla Sun Life AMC Limited /Aditya Birla Sun Life Mutual Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments.

    Aditya Birla Sun Life PSU Equity Fund
    (An open ended equity scheme following PSU theme)

    This product is suitable for investors who are seeking

    • Long term capital appreciation

    • Investments in stocks of Public Sector Undertakings
    *Investors should consult their financial advisers if in doubt whether the product is suitable for them

    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

     

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