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5 Key Benefits Of SIP Investments In PSU Equity Fund

Investing in Public Sector Undertaking (PSU) equity funds is a unique investment avenue that has gained popularity among Indian investors seeking to benefit from government-backed companies’ stability and potential growth. When combined with a Systematic Investment Plan (SIP), these funds offer a compelling investment strategy. In this blog, we’ll explore the five key benefits of SIP investments in a PSU equity fund in India, shedding light on the unique advantages of this investment approach.

What is a PSU Equity Fund?

A PSU equity fund is a mutual fund scheme that primarily invests in stocks issued by public sector undertakings (PSUs) or government-owned companies. PSUs are entities that are owned or controlled by the government. These funds are managed by professional fund managers who make investment decisions on behalf of the investors.

Benefits of SIP Investments in PSU Equity Fund

1. Consistent Investment Discipline

SIP investment instils a consistent investment discipline, providing a sense of security and confidence. By committing to invest a fixed amount regularly, investors develop a habit of consistent investing, irrespective of market conditions. This disciplined approach helps build a substantial corpus over time without the stress of trying to time the market. Consistent investment reduces market timing risk, automates savings, and provides peace of mind by ensuring regular contributions towards financial goals.

2. Rupee Cost Averaging

Another significant advantage of SIP investments in PSU Equity funds is rupee cost averaging. This strategy helps investors average out the purchase cost of their investments over time. By investing a certain amount at regular intervals, you buy fewer units when prices are high and more units when prices are low, lowering the average cost per unit over the long term. Rupee cost averaging helps manage volatility, ensuring that short-term price fluctuations do not overly affect the investment and can lead to lower average costs and potentially higher returns.

3. Potential for Long-Term Growth

PSU equity funds also offer the potential for long-term growth, instilling a sense of optimism and hope. These funds invest in shares of public sector companies, which are often large, established, and have a significant impact on the economy. These companies tend to have stable earnings and can benefit from government policies and reforms aimed at promoting growth in various sectors. Public sector companies often receive direct and indirect support from the government, driving growth and stability. Sectors such as banking, energy, and infrastructure, where many PSUs operate, are crucial for economic development, offering significant growth potential. Additionally, many PSUs have a history of paying regular dividends, providing an additional source of income for investors.

4. Tax Benefits

Investing in PSU equity funds through SIPs can also offer tax advantages, especially if held for the long term. Long-term capital gains (LTCG) from equity funds are taxed at a lower rate than short-term gains. Gains from equity investments held for more than one year are classified as long-term. They are taxed 10% for amounts exceeding ₹1 lakh without indexation benefit. Although dividends received from equity funds are added to the investor’s income and taxed according to their income slab, the overall tax burden may still be lower than other forms of investment income.

5. Convenience and Flexibility

SIP investments offer a high degree of convenience and flexibility, making them accessible to many investors. SIPs allow you to start with a small investment amount, making it easier for new investors to enter the market. Contributions can be adjusted based on financial situations. SIP investments in PSU equity funds are liquid, allowing investors to redeem their units easily if needed. This combination of convenience and flexibility ensures that SIPs can be tailored to suit individual financial goals and circumstances.


Investing in PSU equity funds through SIP combines the stability of government-backed companies with the benefits of regular investing. Consistent investment discipline, rupee cost averaging, potential for long-term growth, tax benefits, and convenience and flexibility make SIP investments in PSU equity funds a compelling choice for investors in India.

By leveraging these benefits, investors can build a diversified portfolio to deliver steady returns and capital appreciation over time. As always, assessing your risk tolerance and financial goals is crucial, and consulting with a financial advisor is also important to tailor an investment strategy that best suits your needs.