- Is It Good to Invest in Banking & PSU Debt Funds?
- Yes, if they invest in top-rated debt instruments of banks and PSUs
- These instruments will ensure safety as well as good returns
Banking & PSU Debt mutual funds, which invest in debt and money-market instruments issued by banks and other public sector undertaking (PSU) units, have remained solid over the last one year despite weak market cues. A few of them have delivered double-digit returns during this period, something you don’t normally associate with a debt mutual fund. Let’s check out here the top-performers of this category.
Top-performing Banking & PSU Debt Mutual Funds
|Banking & PSU Debt Funds||1-year Return||3-year Return||5-year Return|
|Axis Banking & PSU Debt Fund||12.05%||8.38%||8.45%|
|Franklin India Banking & PSU Debt Fund||12.37%||7.87%||8.34%|
|IDFC Banking & PSU Debt Fund||12.90%||7.87%||8.11%|
|Nippon India Banking & PSU Debt Fund||11.72%||7.57%||-|
|SBI Banking and PSU Fund||10.21%||7.70%||8.14%|
Note – Data sourced from Value Research as on October 15, 2019
What Has Led to the Rise in Banking & PSU Debt Funds?
These funds invest in a mix of bonds, debentures and other debt instruments issued by banks and public sector undertakings (PSUs). Normally, these institutions bear a good rating of AAA, AA and A. These institutions remained true to their credit rating by paying the dues to mutual fund houses. This eventually resulted in the impressive returns of these funds. What also works well for these funds is the immense liquidity that bonds and other debt instruments of banks and PSUs offer. Fund managers can easily buy and sell these instruments in the secondary market to make the most of the pricing opportunities.
Shall You Invest in These Banking & PSU Debt Funds?
It’s a question worth asking given the performance these funds have delivered despite weak market cues. It will all depend on the asset allocation of these funds. Check where the money is going to, whether it’s going to top-rated (AAA, AA) instruments or the less fancied B and C-rated instruments. AAA and AA-rated instruments offer high stability and ensure timely payment. Whereas, B and C-rated instruments are much volatile in nature and can eat into the earnings in the face of a weak market environment. You can thus decide now.
Disclaimer – Mutual fund investments are subject to market risks. Please read the scheme related documents carefully before investing.