PSU funds in August 2026: strong years, behind the index

Three years at 24% a year

Over the three years to Thursday, 20 August 2026, the median actively managed PSU equity fund returned 24.05% a year. Our estimate of the Nifty 50's total return over the same years was 9.24% a year, and the median flexi-cap fund's 14.31%.

Yet none of those funds kept up with the PSU indices themselves. The Nifty PSE returned an estimated 25.74% a year over the three years and the Nifty CPSE 27.34%.

There are five active PSU equity funds, all in SEBI's sectoral and thematic category. Debt funds named "Banking and PSU" and the PSU bond index funds are a different thing and are left out. All figures are for the Direct plan, Growth option, from daily NAVs to 20 August 2026.

Active funds against the indices

The estimates add each index's daily dividend yield to its price, because we don't hold NSE's official total return indices. For these two indices that matters more than usual. Over five years, the Nifty PSE's price alone rose 22.86% a year; with dividends, our estimate is 28.23%. For the Nifty CPSE, 26.81% becomes 32.47%.

The pattern flips with the window. Over one year every active fund beat both indices, by between 2.4 and 9.5 points. Over three and five years every fund trailed both. Over ten years, Invesco India PSU Equity (16.88% a year) beat both, while SBI PSU (14.39%) trailed both.

The indices are well below their 2024 record

The Nifty PSE closed at 9,743.15 on 20 August, 16.99% below its record of 11,737.35 from 1 August 2024. The Nifty CPSE set its record the same day, at 7,647.95, and is 15.94% below it.

After that peak the Nifty PSE fell 31.30%, to 8,064.05 on 28 February 2025. Its three-year return is high because the window starts on 18 August 2023, at 5,372.90, before most of the rise.

The active funds are closer to their highs than the indices are. Four of the five were within 8% of their peak NAV on 20 August, from ABSL PSU Equity at 4.58% below to SBI PSU at 7.51%. quant PSU, launched in February 2024, was 16.07% below.

The passive and narrower PSU funds

PSU banks and railway PSUs went opposite ways over the year. The Nifty PSU Bank returned an estimated 23.82% and the Nifty India Railways PSU −17.07%.

The cost of the ride

The four PSU funds with a three-year record had a median annualised volatility of 21.11% and worst falls of between 23.03% and 29.84%. For the median flexi-cap fund, volatility was 14.18% and the worst fall 18.46%.

Cheaper than the market, richer than its own past

The Nifty PSE's P/E closed at 11.06 on 20 August and its dividend yield at 2.62%. Since NSE moved to consolidated earnings on 31 March 2021, its median P/E has been 9.68 and its median yield 3.69%. The Nifty 50 closed the same day at a P/E of 20.48 and a yield of 1.17%. So the PSU index is cheap next to the broad market but more expensive than its own recent history.

What this does not tell you

Five funds is a thin sample. With so few funds, a median is close to anecdote.

The benchmark is our estimate, and the dividend part is large. The gap between a PSU index's price return and its total return is several points a year, so a fund compared with the price index alone would look far better than it is.

A three-year return from a low start. The three-year figures begin before the 2023–24 rise. Nothing here is advice to buy or sell any fund.

Where to go from here

The sectoral and thematic fund page lists every theme fund, and infrastructure and PSU funds explains how PSU funds work.

For other themes set against their indices, see defence funds in July and infrastructure funds in July. For the bank index's valuation this month, see the Nifty Bank P/B in August.