Investors need to exercise prudence after PSU funds' robust surge

Only high-risk investors should take limited exposure to these funds, provided they have a long horizon

Mutual funds belonging to the public sector unit (PSU) theme have fetched an average return of 42 per cent over the last year. The bulk of this rally (28.9 per cent) took place over the last six months. While the theme may continue to perform, investors need to exercise caution after such a steep run-up.          

Earnings upsurge, low valuations

Multiple factors are driving the rally in PSU stocks. According to Ashutosh Bhargava, fund manager and head-equity research, Nippon India Mutual Fund, “Many of these stocks are in cyclical sectors like infrastructure, power, and banking,