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4 Best Performing Banking And PSU Funds Better Than Fixed Deposits
Although it is well known that investing in fixed deposits can give good returns only if you stay invested for at least 5 years. But what if you get higher returns than bank fixed deposits in a short duration?.
Among the debt instruments, banking and PSU funds are one of the secure investments in which investors with a low-risk appetite having a mid-term financial goal can invest. These are the funds that primarily invest in leading banks and public sector companies of India and have the potential to give higher returns than other debt instruments like bank fixed deposits, small savings schemes, Public Provident Fund (PPF) and so on. So if you are an investor with a low-risk appetite, having a mid-term financial goal and want to get higher returns than fixed deposits among the debt category, then here are the 4 best performing banking and PSU funds in 2021 to invest in.
This fund was launched in January 2013 by the fund house Kotak Mahindra Mutual Fund. The 1-year returns for Kotak Banking and PSU Debt Fund Direct-Growth are 5.53 per cent. Since its inception, it has generated an average annual return of 8.90 per cent according to Value Research, which is unquestionably greater than the current interest rates of fixed deposits offered by leading banks. This fund has been rated 4-star by Value Research, which indicates the stability of the fund in terms of generating returns.
Union Bank of India, Reserve Bank of India, Rural Electrification Corpn. Ltd., Bank Of Baroda, and National Bank For Agriculture & Rural Development are among the fund's top 5 holdings. As of 6 July 2021, the latest NAV of the fund is Rs 52.38 and the current asset under management (AUM) of the fund is Rs 9,714 Cr. One can start investing in this fund with a minimum SIP of Rs 1000 with no exit load.
This banking and PSU mutual fund of IDFC Mutual Fund which was launched in February 2013 has also performed well in the last 3-5 years. The 1-year returns of the IDFC Banking & PSU Debt Fund Direct-Growth are 5.07 per cent. According to Value Research data, it has generated an average yearly return of 8.53 per cent since its inception. Axis Bank Ltd., Hindustan Petroleum Corpn. Ltd., GOI, Small Industries Devp. Bank of India Ltd. and National Highways Authority of India Ltd. are among the fund's top 5 holdings.
This fund has been rated 5-star by Value Research and has an expense ratio of 0.30%. As of July 6, 2021 the latest NAV of the fund is Rs 19.78 and the current asset under management (AUM) of the fund is Rs 18,547 Cr. By making a minimum contribution of Rs 1000, one can start SIP in this fund with no exit load.
Nippon India Mutual Fund introduced this banking and PSU direct growth fund in May 2015. Nippon India Banking & PSU Debt Fund Direct-Growth returns are 5.26 per cent over the last 1-year. Since its inception, it has had an average yearly return of 8.65% and has been rated 5-star by Value Research.
National Bank For Agriculture & Rural Development, GOI, Small Industries Development Bank of India Ltd., Rural Electrification Corpn. Ltd., and National Thermal Power Corp. Ltd. are among the fund's top 5 holdings. As of July 6, 2021 the latest NAV of the fund is Rs 16.65 and the current asset under management (AUM) of the fund is Rs 6,364 Cr. SIP in this fund with no exit load can be started with a minimum contribution of Rs 100.
Axis Banking & PSU Debt Direct Plan has a 1-year growth rate of 4.83 per cent. According to Value Research data, it has provided an average yearly return of 8.59 per cent since its inception. This fund was launched in January 2013 by Axis Mutual Fund. National Bank For Agriculture & Rural Development, Food Corporation of India, Small Industries Devp. Bank of India Ltd., Hindustan Petroleum Corpn. Ltd., and Indian Oil Corpn. Ltd. are among the fund's top 5 holdings.
Value Research has given the fund a four-star rating, and it has an expense ratio of 0.31 per cent. The fund has its debt allocation across sovereign, energy, financial, and FMCG sectors. As of July 6, 2021 the fund has a NAV of Rs 2123.43 and the current asset under management (AUM) of the fund is Rs 17,077 Cr. This fund has no exit load and one can start SIP in this fund with a minimum monthly contribution of Rs 1000.
Here are the 4 best banking and PSU funds in 2021 based on past returns and ratings.
| Funds | 1-year returns | 3-year returns | 5-year returns | Rating by Value Research | Expense Ratio |
|---|---|---|---|---|---|
| Kotak Banking & PSU Debt Fund Direct-Growth | 5.53% | 9.40% | 8.57% | 4 star | 0.36% |
| IDFC Banking & PSU Debt Fund Direct Growth | 5.07% | 9.79% | 8.22% | 5 star | 0.30% |
| Nippon India Banking & PSU Fund | 5.26% | 9.52% | 8.50% | 5 star | 0.33% |
| Axis Banking & PSU Fund Direct-Growth | 4.83% | 9.12% | 8.31% | 4 star | 0.31% |
Should you invest?
According to the data of Value Research, banking and PSU funds have generated an average SIP-return of 7.80% in the last 5 years. If we look at the last 3 to 5 years returns of banking and PSU funds, most of the funds have generated more than 8% returns. These returns are much higher than the prevailing interest rates of fixed deposits of leading commercial and private sector banks. On the other side, corporate fixed deposits may give you higher returns than banking and PSU funds. But corporate fixed deposits are not suggested to invest for risk-averse investors as they are not insured by DICGC.
Investing in debt and PSU funds are not recommended for senior citizens as the returns are market-based. As a result, they can invest in special fixed deposit schemes or fixed deposits of small finance banks as they are insured by DICGC. As a final conclusion and not a suggestion to invest, investors who have a mid-term goal and low-risk profiles can invest in debt and PSU funds for higher market-based average returns than fixed deposits, but investors who do not want to welcome market-based returns in their portfolio can invest in fixed deposits of small finance banks for higher returns than fixed deposits of commercial and private sector banks.
Disclaimer
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