Best PSU Mutual Funds in India 2026: Top 5 & Guide
What PSU mutual funds are, who should invest, key risks, and the top 5 funds with returns and risk data.
PSU mutual funds invest in public sector undertakings, companies in which the government holds more than 51%. They give exposure to government-backed businesses across power, banking, infrastructure, defence and energy. This guide covers who should invest, benefits, risks, and the 5 PSU equity funds in our data.
Key takeaways
- PSU funds invest in equity, debt or a mix of securities of public sector undertakings.
- PSU companies span sectors such as power, banking, infrastructure, defence and energy.
- Government policy has a significant effect on PSU businesses and fund performance.
- Equity-oriented PSU funds carry higher risk and suit long-term investors; the ideal horizon is over 5 years.
- Only 5 PSU equity funds match in our data, ranked below by an internal score.
What are PSU mutual funds?
PSU mutual funds invest in equity, debt or a mix of securities of public sector undertakings (PSUs). A PSU is a company in which the government holds over 51% of the controlling share. PSU companies span sectors from power, banking and infrastructure to defence and energy. Depending on the fund and the manager's strategy, a fund may focus on a specific sector or theme; for instance, a PSU banking fund may hold more PSU bank securities.
Who should invest in PSU mutual funds?
- Long-term investors.
- Investors with a larger risk appetite, since thematic or equity-oriented PSU funds carry higher risk.
- Investors who want exposure to the wider PSU sector or one industry within it.
- Investors who understand government policies and macroeconomic trends.
What should you consider before investing?
- Government policy: PSUs are owned mainly by the government, so policies have a significant effect on their performance.
- Investment objectives: consider your horizon, risk profile and philosophy.
- Fund strategy and performance: understand which sectors the fund targets, and compare past performance and the manager's track record.
- Costs: compare the expense ratio, exit load and transaction charges.
Advantages of PSU mutual funds
- Stability: government-backed, often large and established companies.
- Dividend yield: several PSU companies have a record of paying regular dividends.
- Diversification by combining government-backed and privately owned companies in a portfolio.
- Higher growth potential: PSU companies can outperform the market.
Risks of PSU mutual funds
- Policy and political risk: unfavourable policy changes can hit the sector.
- Cyclicality: performance follows economic cycles, so entering at a peak or in a downturn can disappoint.
- Concentration risk: a single sector or theme can expose the fund to more risk.
How are PSU mutual funds taxed?
The tax treatment depends on whether the fund is equity-oriented or debt-oriented, and on when you bought the units. Dividends from PSU debt funds are taxable at your slab rate. Rules change, so check the current position or speak to a tax advisor.
Top 5 PSU mutual funds ranked by an internal score
These are the top 5 PSU funds from our data, ranked by Invo Wealth's internal fund-quality score. The score itself is not shown, only the return and risk numbers behind it. These funds are matched by theme from their names rather than from an official SEBI sub-category. A "--" means the fund has not completed that period or the data is unavailable.
Returns across 6 months to 5 years
Performance data as of 5 September 2026.
| Fund | 6M CAGR | 1Y CAGR | 3Y CAGR | 5Y CAGR |
|---|---|---|---|---|
| SBI PSU FUND | -10.53% | 10.91% | 20.01% | 22.58% |
| Aditya Birla Sun Life PSU Equity Fund | -3.40% | 14.40% | 19.54% | 22.29% |
| Invesco India PSU Equity Fund | -6.30% | 6.68% | 19.53% | 20.03% |
| ICICI PRUDENTIAL PSU EQUITY FUND | -3.89% | 9.92% | 20.63% | -- |
| quant PSU Fund | 20.22% | 10.03% | -- | -- |
Risk and consistency metrics
| Fund | ISIN | Volatility | Max drawdown (3Y) | Sortino ratio |
|---|---|---|---|---|
| SBI PSU FUND | INF200K01BC0 | 25.08% | -24.59% | 0.69 |
| Aditya Birla Sun Life PSU Equity Fund | INF209KB1O66 | 25.48% | -27.38% | 0.65 |
| Invesco India PSU Equity Fund | INF205K01338 | 26.83% | -30.41% | 0.62 |
| ICICI PRUDENTIAL PSU EQUITY FUND | INF109KC19H2 | 22.19% | -23.65% | 0.82 |
| quant PSU Fund | INF966L01DQ0 | 27.16% | -31.63% | 0.15 |
Only equity funds with PSU in the name are matched, so the list is shorter than ten. Compare volatility and drawdown carefully because PSU funds are concentrated.
How to invest in PSU mutual funds
You can invest in these funds using the Invo Wealth app. Sign up, get complete portfolio insights and start investing in mutual funds that actually suit you.
Conclusion
PSU funds give long-term investors exposure to government-backed companies, with policy and concentration risk attached. Keep the horizon long and exposure limited.
Frequently asked questions
What is a PSU mutual fund?
A PSU mutual fund invests in the securities of public sector undertakings, companies in which the government holds more than 51%.
Why invest in a PSU mutual fund?
It gives exposure to PSU companies across sectors with growth potential. Many are government-backed, relatively stable, and have a record of paying regular dividends.
Are PSU mutual funds a safe investment?
PSU companies are relatively stable, but they are sensitive to government policies, market conditions and economic cycles, so the funds suit investors with a higher risk profile.
What is the ideal investment horizon for PSU funds?
Over 5 years.
How can I invest in PSU mutual funds?
You can invest through a SIP or a lump sum. To invest in these funds, you can use the Invo Wealth app: sign up, get portfolio insights and start investing.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. This article is for education only and is not investment advice. Past performance does not guarantee future returns. Invo Wealth is an AMFI-registered mutual fund distributor (ARN-368528).