- Banking and PSU funds have to invest at least 80 percent of their total assets in similar institutions.
- As of May 31, there are about 19 Banking and PSU Debt Scheme available, whose AUM is Rs 89,962 crore.
- new Delhi. Coronavirus Era has seen a significant decline in fixed deposit interest rates. In such a situation, people are inclined towards such investments from where they can get maximum returns. In such a situation, people are currently getting attracted towards banking and PSU funds. Which are fixed income funds and invest in debt and money market.Such funds issue banks, public sector undertaking and public financial institutions. As per the Securities and Exchange Board of India rules, banking and PSU funds have to invest at least 80 per cent of their total assets in similar institutions. Banks and PSU funds issued in debt and money markets have a better credit quality than other funds. According to the figures, as of 31 May 2020, there are about 19 banking and PSU debt schemes available, with an AUM of Rs 89,962 crore.Soon CNG and PNG prices will be reduced, the government made this plan
There are four ways you can invest
1. Maintaining high credit quality: Such a scheme targets investments in most high quality funds.
2. Short to Moderate Duration Profile = Such scheme has moderate interest rate risk. The time limit for the portfolio of both types of funds is 2 to 5 years.
3. Keep till maturity: It is important to keep such schemes till maturity. In such schemes from debt and money market, principal account is also available with interest on maturity.
4. Active management for the medium term: Fund managers make active term calls based on their interest rate outlook. Such schemes have given double digit growth due to falling interest rates in the last one year.How many times you can switch in the new and old tax system, know here
Why should you invest in banking and PSU funds?
Mirae Asset Investment Managers India Pvt. According to Limited Products Head Vaibhav Shah, interest risks in banking and PSU funds are medium term. While your money still benefits after low interest rates, the downside risk in a rising interest rate environment is limited. These schemes generally offer attractive returns to maturity due to having a good credit quality. First of all, one of the most important factors that have enabled banking and PSU funds to deliver good returns is superior credit quality ‘.According to Vaibhav Shah the instruments in which these schemes invest as per the mandate of SEBI are inherently of high credit quality. This is because they have the support of the government. Banks (both public sector and private sector) enjoy high credit ratings as they are regulated bodies and are generally well capitalized.
According to him, the second thing is that banking and PSU funds have improved most debt fund categories. Maturity profile The average annual returns of many other debt fund categories have been better than the banking and PSU fund categories across the spectrum. Banking and PSU funds clearly outperform most debt fund categories.
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Market conditions
Vaibhav Shah, looking at the current economic climate of the market, says that with the pace of growth slowing and RBI is committed to a monetary policy, debt mutual funds are likely to outperform traditional fixed income products. Also, the credit environment has been deteriorating in India with business and business for some time.The debt servicing capability of many issuers may be questionable due to the lockdown. Banking and PSU funds are well suited under the current circumstances as they have attractive yields, moderate interest rate risk and most importantly, high credit quality.
These funds are suitable for medium risk investors. Investors can enjoy long-term capital gains if they continue to invest for more than 3 years. If banking and public sector undertakings are suitable for their investment needs, investors should consult their financial advisor.
