Best Banking & PSU Mutual Funds to Invest in August 2024

Investors seek stability and steady profits in volatile market circumstances. Mutual funds from PSUs (Public Sector Undertakings) and banking are dependable options that combine development potential with safety. These funds generate consistent income while acting as a buffer against market volatility by primarily investing in debt instruments issued by banks and public sector organizations. 

Let’s look at the best-performing PSU and banking mutual funds that are well-positioned to reduce risk and provide stable returns in the present investment environment.

What are Banking and PSU Funds?

The Securities and Exchange Board of India (SEBI) had introduced a sub-category of funds known as Banking and PSU funds in the debt mutual funds. These funds are open-ended and invest around 80% of their total net assets in public sector undertakings, debt instruments of banks, municipal bonds, and public financial institutions.

Top PSU and Banking Funds for Investing in 2024

Here are the top five banking and PSU funds to invest in 2024:

• Bandhan Banking and PSU Debt Fund

1. NAV – INR 22.36
2. Fund Size – INR 14384. 47 Cr
3. Expense Ratio – 0.63%
4. Risk-o-Meter – Moderate
5. Tax treatment – if sold three years from purchase, long-term capital gain tax will be applicable.
6. Portfolio – debt – 97.09% and others – 2.91%

• Kotak Banking and PSU Debt Fund

1. NAV – INR 59.21
2. Fund Size – INR 5991.6 Cr
3. Expense Ratio – 0.81%
4. Risk-o-Meter – Moderate
5. Tax treatment – if sold three years from purchase, long-term capital gain tax will be applicable.
6. Portfolio – Not available

• Axis Banking and PSU Debt Fund

1. NAV – INR 2391.02
2. Fund Size – INR 13930.05 Cr
3. Expense Ratio – 0.63%
4. Risk-o-Meter – Moderate
5. Tax treatment – if sold three years from purchase, long-term capital gain tax will be applicable.
6. Portfolio – debt – 95.48% and others – 4.52%

• DSP Banking and PSU Debt Fund

1. NAV – INR 21.80
2. Fund Size – INR 2365.28 Cr
3. Expense Ratio – 0.57%
4. Risk-o-Meter – Moderate
5. Tax treatment – if sold three years from purchase, the long-term capital gain tax will be applicable.
6. Portfolio – debt – 93.9% and others – 6.1%

• ABSL PSU Equity Fund

1. NAV – INR 33.34
2. Fund Size – INR 3329.97 Cr
3. Expense Ratio – 1.93%
4. Risk-o-Meter – Very High
5. Tax treatment – if sold one year from purchase, long-term capital gain tax will be applicable.
6. Portfolio – equity – 90.96% and others – 9.04%

Fund name	Minimum investment	Asset under management	1-yr CAGR	3-yr CAGR	5-year CAGR
Bandhan Banking and PSU Debt Fund	INR 1000	INR 14384. 47 Cr	7.32%	5.16%	7.12%
Kotak Banking and PSU Debt Fund	INR 100	INR 5991.6 Cr	7.53%	5.93%	7.41%
Axis Banking and PSU Debt Fund	INR 1000 (SIP) INR 5000 (Lumpsum)	INR 13930.05 Cr	7.51%	5.33%	6.98%
DSP Banking and PSU Debt Fund	INR 100	INR 2365.28 Cr	7.69%	5.17%	6.67%
ABSL PSU Equity Fund	INR 500	INR 3329.97 Cr	100.30%	43.84%	0.00% (the fund has not completed five years)

Who Should Invest in Banking and PSU Mutual Funds?

These funds are significant for the below-mentioned investors:

1. Investors who are risk-averse or conservative and want a mutual fund choice that is somewhat safer for their portfolio.
2. Investors wishing to place excess money into a safe plan to safeguard their portfolio and make these debt mutual funds well serve significant returns.
3. Investors who seek out high returns ought to choose these mutual funds.

Advantages of Investing in Banking and PSU Mutual Funds

Here are some benefits of investing in Banking and PSU Mutual Funds:

1. Lower risk – These funds are often safer than private debt funds because of their affiliation with government organisations, which frequently translates into a lower default risk.
2. Stable return – Since debt instruments generate interest revenue, they can provide predictable returns.
3. Quality of assets – As these funds are supported by public sector organisations, their debt instruments are often of an excellent credit grade.
4. Regular income – These are ideal for investors looking for a steady source of income because these funds usually distribute interest returns.
5. Diversification – You can increase portfolio diversity by including these funds, mainly if your holdings are more heavily weighted toward private debt or equities.

Conclusion

Investors want steady profits and predictability, and PSU and banking mutual funds stand out as dependable options that provide a healthy mix of development potential and safety. In the ever-changing world of investments, these funds offer a chance for consistent income creation thanks to their capable management and bright future.