SBI PSU Fund Review
PSUs (Public Sector Undertakings) are the buzz word right now and seems to the driving force of India’s growth story one way or the other. And SBI Mutual Funds seems to have understood that well and have introduced this New Fund Offer (NFO) namely SBI PSU Fund. This NFO from SBI Mutual Fund closes on June 14, 2010. It is an open-ended equity scheme and a diversified sectoral fund.
Since PSUs pave way for India’s growth and SBI Mutual Fund is targeting this factor and would help you invest in all major PSUs available in India which has the growth potential and thereby helping India’s growth directly.
The 15% of India’s GDP is contributed by the top 18 PSUs, there are 20 companies in BSE100 which are PSUs, and there is at least one PSU in every 5 companies in Nifty50. There are also bigger players like ONGC, OIL, NTPC, PSU Banks, BHEL and much more which can significantly help in this fund’s success.
The factors that could help SBI PSU Fund to score are: Divestment opportunity, creators of wealth, attractive valuations and higher dividend payouts, etc.
Investment Objective: The main objective of SBI PSU Fund is to generate wealth by investing in equities of PSU companies as well as in debt and money market.
Asset Allocation: Around 65-100% in equities oriented to PSU companies and the rest (35%) in money market instruments and debt.
Options Available: Growth and Dividend (Payout and reinvestment).
Offer Price and Investment: Minimum investment of Rs. 5000 and in multiples of Rs. 1 and above. The NAV during NFO is Rs. 10 per unit. Investment via SIP is available.
Loads: No entry load but there is an exit load of 1% if exited with 3 years of allotment and no exit load if redeeming after 3 years.
Sectors Targeted: Oil and gas, financial services (banks, etc), engineering as well as capital goods.
This fund although looks lucrative as well as being an NFO, as the thumb rule is ignore NFOs in the turbulent market, it left to you to take the plunge or not. But my advice would be to pass it on and/or wait until it reopens after one month of its closure of NFO, i.e., one month after June 14, 2010, and then see how it fares and then buy if you are new to NFOs as well as mutual funds. Instead try other well diversified and existing funds which have deep roots in the existing equities, even though their NAV may be pretty high which in fact is not a major factor at all when it comes to MFs.
Otherwise, SBI PSU Fund a good one as it is targeting the major PSUs in India which gets all the benefits and divestments and much more from Indian Government. Since these PSUs include major nationalized banks in India and thus it adds more value to it. After the NFO, this fund has the full potential to become one of the top funds in India.
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