ICICI Prudential Mutual Fund Launches PSU Equity Fund

ICICI Prudential Mutual Fund has launched a new fund on 23rd August- ICICI Prudential PSU Equity Fund. The new fund offer (NFO) will remain open for investors until  6 September 2022.
It is an open-ended equity scheme with an objective to provide long-term capital appreciation by investing predominantly in equity and equity related instruments of PSU companies. The scheme may invest in sectors/stocks that form a part of S&P BSE PSU Index.
Average dividend yield of S&P BSE PSU Index in the last 17 years is 2.6 whereas that of S&P BSE Sensex is 1.3.
According to the press release, the scheme may invest in opportunities across market cap i.e. large, mid or small cap. With minimum 80 % in PSU stocks, the scheme may invest up to 20 % in other equities & equity related securities.
The scheme is suitable for investors who are looking for opportunities to participate in the potential growth story of PSUs, as it tends to offer better dividend yield than broader markets.
Mittul Kalawadia and Anand Sharma are the fund managers for ICICI Prudential PSU Equity Fund.
The fund aims to generate returns through a combination of dividend income and capital appreciation by investing primarily in a well-diversified portfolio of value stocks. 
According to the fund house, investing in PSU stocks offers a range of benefits. First, the cost of borrowing is low owing to inherent sovereign comfort leading to better credit rating/standing. This is beneficial during rising interest rate scenarios.
Second, PSU stocks have relatively less Key Managerial Personnel (KMP) risk from a continuity perspective as compared to promoter-run companies. Third, PSU stocks have lesser risk of diversification into unrelated businesses.
Fourth, PSUs usually tend to pay higher dividends. If invested directly, dividends are taxed as per slab rates. When invested through a mutual fund, such dividends are exempt from tax under mutual fund schemes.



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25th Sept 2020
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