New Delhi: Religare Mutual Fund on Tuesday announced the launch of an open-ended PSU Equity Fund.

The fund seeks to generate capital appreciation by investing in companies where the central or state governments has majority shareholding or where the management control lies with the government, Religare Mutual Fund said in a statement.

The fund aims to select fundamentally sound companies having the potential to deliver superior growth in the long term, it said.

The fund will invest in public sector companies having presence in core sectors and companies, which are expected to benefit from the divestment process and reforms.

At least 65% of the assets will be invested in companies, which are part of the BSE PSU Index.

The remaining 35% will be invested in PSUs outside the BSE PSU Index, it said, adding, the fund will also participate in forthcoming IPOs of such companies.

Speaking on the occasion, Religare Mutual Fund CEO Saurabh Nanavati said, PSU companies are attractively priced in terms of valuations vis-a-vis the broader markets and the BSE Sensex-almost at a 20-30% discount, thereby offering a good margin of safety for the investor.

With GDP growth being led by government spending last year and for the next 2-3 years, PSUs will be natural beneficiaries, with strong growth potential, he said.