The new fund offer (NFO) of ICICI Prudential PSU Equity Fund would open on 23 August and close on 6 September.
The scheme may invest in opportunities across market capitalizations i.e. large, mid or small cap. With minimum 80% in PSU stocks, the scheme may invest up to 20% in other equity and equity related securities.
According to the fund house, the scheme is suitable for investors looking for opportunities to participate in the potential growth story of PSUs, as they look appear to be attractively placed on valuation basis and also offer better dividend yield than broader markets.
Speaking on the launch, Chintan Haria, head-product development and strategy, ICICI Prudential AMC said, “PSU companies form an important constituent of capital markets and are present across different sectors presenting wide investment opportunities. Also, PSUs appear to be attractively placed on valuation basis and offer better margin of safety. In a volatile environment, companies providing high dividend yield tend to have higher demand resulting in capital appreciation."
The average dividend yield of the S&P BSE PSU Index in the last 17 years is 2.6 whereas that of S&P BSE Sensex is 1.3.
Mittul Kalawadia and Anand Sharma will be fund managers to the scheme.
According to the fund house, historically, in the run-up to elections, PSUs tend to perform well on optimism around reforms.
“PSUs could do well over next 2 years given pre-election period. Apart from these, investing in PSU stocks provides a range of benefits. Cost of borrowing is low owing to inherent sovereign comfort leading to better credit rating/standing. This is beneficial during rising interest rate scenario. In addition, PSU stocks have relatively less Key Managerial Personnel risk from a continuity perspective as compared to promoter run company. PSU companies pose lesser risk of diversification into unrelated businesses and they also tend to pay higher dividends," ICICI Prudential Mutual Fund said.
