PSU bias makes equity funds chart-topper in September
The month of September was great for PSU stocks, perceived as value picks in a stock market that is trading historically at higher valuations. Naturally, equity funds that have big bets on PSU stocks reaped rich rewards. PSU stocks such as Oil India, IRCTC, Coal India, BHEL, NTPC, IDBI Bank, ONGC, NLC India, IFCI, Indian Overseas Bank, Shipping Corp, RCF, IOC etc. were among the winners in BSE 500 index. These stocks gained between 13-43 per cent in September alone, boosting the NAVs of equity funds. On the other side of the spectrum, international equity funds and pharma/healthcare funds had a forgettable month. Here are the details.
PSU portfolios get boost
CPSE ETF was the biggest gainer among the nearly 500 equity schemes in September. It gained 17.39 per cent in September, nearly double of the second best gaining equity fund. CPSE ETF, launched in March 2014, has seen more downs than ups in its nearly 7 year old track record. The product has big bets on PSU stocks such as Power Grid (PGCIL), ONGC, NTPC, Coal India, Bharat Electronics and NMDC.
Other schemes that performed exceedingly well in September include portfolios with high PSU bias. These include ICICI Pru Bharat 22 FOF (up 9.90 per cent), ICICI Pru India Opp (9.54 per cent), ICICI Pru Large & Midcap (8.54 per cent), Quant Infra (7.92 per cent), ABSL PSU Equity (7.90 per cent) and ICICI Pru Infrastructure (7.78 per cent), .
| 10 best equity funds in September 2021 | ||
| Fund Name | Sep-2021 (% gain) | Category |
| CPSE Exchange Traded Fund | 17.39 | EQ-PSU |
| ICICI Prudential BHARAT 22 FOF | 9.90 | EQ-LC |
| ICICI Prudential India Opportunities Fund | 9.44 | EQ-THEMATIC |
| BHARAT 22 ETF | 9.37 | EQ-LC |
| ICICI Prudential Large & Mid Cap Fund | 8.47 | EQ-L&MC |
| Aditya Birla Sun Life PSU Equity Fund | 7.79 | EQ-PSU |
| Quant Infrastructure Fund | 7.76 | EQ-INFRA |
| ICICI Prudential Infrastructure Fund | 7.72 | EQ-INFRA |
| Motilal Oswal Midcap 100 Exchange Traded Fund | 7.03 | EQ-MC |
| Baroda Midcap Fund | 6.81 | EQ-MC |
Category wise
In terms of equity funds category, the month of September brough smiles for some while it was agony for a few.
Banking equity funds gained an average 1.95 per cent, with Nippon India ETF PSU Bank BeES and Kotak PSU Bank ETF growing their NAV over 6 per cent each.
PSU funds had the biggest average gain of 8.02 per cent, partially because of a high gain in a few schemes that includes schemes already mentioned as well as Invesco India PSU Equity and SBI PSU Fund.
Consumption equity funds saw an average gain of 3.81 per cent, with ICICI Prudential Bharat Consumption and SBI Consumption Opportunities ruling the charts.
Tax-saving or ELSS funds saw an average gain of 3.11 per cent in September, with Parag Parikh Tax Saver and Quant Tax Plan performing the best among peers.
Infrastructure funds, with sizable allocation to PSUs, gained an average 4.47 per cent in September, with Quant Infrastructure and ICICI Prudential Infrastructure doing well.
International equity funds lost an average 2.5 per cent this month, with Aditya Birla Sun Life Commodity Equities – Global Agri Plan, DSP World Energy Fu and Nippon India Japan Equity being the worst performers.
Largecap funds, which consist among the biggest categories, saw an average gain of 2.7 per cent in September. Midcap funds reported an average gain of 4.16 per cent. Multicap funds saw an average 3.28 per cent gain while smallcap funds posted clocked nearly 5 per cent average gain in September.
Going ahead
In September, the mutual fund industry AUM is expected to continue its rising trajectory. The rally in the equity markets has been well diversified with sector rotation in play in the last few months.
Small cap funds staged a comeback after a brief period of underperformance. Small cap funds have been consistent performers since the market recovery post the Covid-19 pandemic induced fall last year.
Midcaps also followed small cap funds and have outperformed other categories.
IT funds have been consistent out performers in the last two to three years as the growth outlook improved for the sector in the post Covid world resulting in a valuation re-rating of most stocks.
Sectors or segments like infrastructure, PSUs, which lagged behind in the early part of the rally, have gained traction, showing the healthy trend of sector rotation.
Global funds have underperformed significantly in the last few months.
Multicap and flexicap funds are better placed for most investors in current environment where midcap and small cap funds have already outperformed significantly.
