PSU index has delivered 45 per cent returns in the last three years. What now?

The BSE PSU Index had a brilliant run in the last three years, delivering staggering returns of over 45 per cent. Naturally, this leads us to the question - should you invest in PSU funds? Let's find out. Historically, PSU (public sector undertaking) companies have largely been overlooked by fund managers owing to their weak fundamentals and high levels of inefficiency. However, the 10-year returns of the BSE PSU index seem to buck the trend. Between 2014 and 2023, it fetched returns of 14.07 per cent, not far behind the Sensex's returns of 14.34 per cent during the same period. The numbers are even more encouraging in the 2021-2023 period, with the index generating returns as high as 45.4 per cent and a positive PAT (profit after tax) growth of 60.9 per cent. A decade of two halves PSU stocks witness a turnaround in last three years on the back of profit growth 2014-20 2021-23 Returns (%) 2.9 45.4 PAT growth (%) -4.2 60.9 Note: Returns and PAT growth of BSE PSU TRI This uptrend has been aptly captured by Mr Amit Nigam, Fund Manager at Invesco Mutual Fund . In a recent interview, he highlighted, "2022 was a year when the stock prices of most PSUs staged a very strong performance, and we observed a turnaround in the business environment for quite a few PSU entities across businesses, which resulted in an improvement in their ROEs . This change led us to enhance our asset allocation