Banking & PSU Fund: The Reserve Bank has not made any change in the interest rates in the monetary policy. The focus of the government and the RBI is on maintaining adequate liquidity in the system. The Reserve Bank has increased the deadline of TLTRO scheme for liquidity from 31 March to 30 September 2021. Looking at the last budget so far, the focus is on strengthening the banking system. Expert says that the Monetary Policy Banking and PSU Fund is going to be positive for the category. This will increase the attraction of investors in these segments. Investors who do not want to take much risk from the market, they should invest in this category. However, keep in mind that the investment target should be at least 3 years.
Adequate liquidity measures
Kumaresh Ramakrishnan, CIO-Fixed Income, PGIM India Mutual Fund, says that there has been no change in rates of any kind in the RBI policy. The liquidity stance has also been retained on accreditation. At the same time, the RBI has taken adequate liquidity measures to keep the economy coming back on track and make it stable.
The quarter wise OMO calendar will help manage the yield curve and continue the borrowing program. RBI estimates that there may be a slight increase in inflation in FY22, while food inflation is expected to decrease. He says that after the policy, banking and PSU, corporate bonds and dynamic bond fund categories will benefit. You can get good returns in the coming days.
Banking & PSU Funds: Why Increase Attraction?
Banking and PSU funds are fixed income funds that invest in debt and money markets. These are issued by banks, public sector undertaking and public financial institutions. According to SEBI rules, banking and PSU funds have to invest at least 80 per cent of their total assets in similar entities.
The reason behind the increasing attraction of banking and PSU funds is that if we talk about the last few months, investors have been cautious in debt segment due to increase in bond yield. They have attractive yield, moderate interest risk and most importantly high credit quality. It gives good returns compared to FD. Their expense ratio is also low.
Return is linked to interest rates
If the interest rates remain low then the returns of these funds increase. Further cuts in rates are possible this financial year. At the same time, these schemes are very liquid. These schemes are less risky than other debt schemes as they invest in high rated instruments. Although they are not completely risk free.
Top Returning Funds in 1 Year
Nippon India Banking & PSU Fund: 9.28%
IDFC Banking & PSU Debt Fund: 9.14%
Tata Banking & PSU Fund: 9%
ABSL Banking & PSU Debt Fund: 9%
ICICI Pru Banking & PSU Fund: 8.78%
L&T Banking & PSU Debt Fund: 8.77%
HDFC Banking & PSU Fund: 8.63%