In this article, we will analyse how good is this SBI PSU Fund NFO, whether this SBI PSU Fund offers anything new or unique for the investors and whether the investors should invest in SBI PSU Fund .
SBI PSU Fund NFO: Review Analysis & Details
Let's begin with some basic details about SBI PSU Fund.What are the NFO dates for SBI PSU Fund ?
The NFO for SBI PSU Fund is currently open and will close on 14th June 2010. After that, regular buying and purchasing will commence through the end of the day NAV system.
What is so unique about this SBI PSU Fund ?
It is a sector specific fund - by sector we mean Public Sector Undertakings - i.e. PSU and that where the name of the fund is derived from. The fund is going to bet the money collected from investors on PSU companies, which are basically the companies run by the government and the government has the majority stake in those.
The advantage is that these companies include commodity products, say oil, metals, minerals, etc. and other utilities like electricity, wind energy, solar energy, etc. so the overall performance of these companies in the PSU sector may be good.
However, one should also notice the risks invovled. Take the case of oil companies like HPCL and BPCL. These oil companies are PSU's and have to suffer huge losses, because the government offers a lot of subsidy to end consumers, thereby reducing the prices of the products which are to be sold. Hence, whether oil trades at $100 per barrel in open market, the government will force these Oil companies to sell oil at 50 Rs. per litre. All this subsidy and public favours may cause a loss to the oil companies and thereby causing a loss to the PSU sector. Hence, if such companies are included in the portfolio of PSU Fund, the fund value will also suffer.
Now the SBI Mutual fund house has put up a chart showing how the BSE PSU Index has outperformed the BSE Sensex over the last 10 year period. However, calculations are not clear and past instances are no guarantee of future returns, so ultimately its the investors call.
The SBI Mutual fund house is quoting the reasons which are known to all - stable government at the center, meaning good and clear investment strategy for PSU companies, returnes are expected to be good, and all the usual blah, blah, but ultimately it boils down to overall performance of the mutual fund manager, his stock picking skills and the performacne of the PSU sector as a whole. The investor needs to take a call on that.
The SBI PSU Fund will be benchmarked to BSE PSU Index.
The plan is to have 65-100% investment in Nifty Index equities and derivatives in PSU related stock companies. 0 to 35% will be debt and money market instruments.
Minimum Investment:
Purchases : Rs. 5000/- and in multiple of Re. 1 thereafter.
SIP or Systematic Investment Plan is also available.
Investment Options for SBI PSU Fund :
- Growth
- Dividend (Payout and Reinvestment)
No Tax Benefit is available in the SBI PSU Fund
The entry load for SBI PSU Fund is as follows:
Entry Load for SBI PSU Fund :
Zero Entry Load
Exit Load for SBI PSU Fund:
Exit within 3 years from the date of allotment - 1 %;
Exit after 3 years from the date of allotment - Nil
Final Thoughts about the SBI PSU Fund?
By investing in this fund, one is betting on the PSU stock picking skills of the fund manager and also on the government controlled PSU sector companies. As long as the government looks stable, things MAY look good for the PSU sector, but one should not forget what happened in 2004. When the NDA led govt was out-voted, all the PSU sector stocks collapsed the market completely, such that the markets have to be shut down twice.
Moreover, this being a sector specific fund, one is betting the money on specific sector. If as an investor, you dont want sector specific exposure, then this fund is not for you.
Overall, this SBI PSU Fund is just another new fund offer for a particular sector, without anything unique that sets it apart from other sector specific funds
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