CPSE ETF Review - Why you should consider investing in this Mutual Fund?

Published on Friday, January 6, 2017 by Dilip Davda | Modified on Sunday, November 3, 2019

CPSE ETF a preferred option for investment

The first Central Public Sector Enterprises - Exchange Traded Fund (CPSE ETF) scheme was launched by Goldman Sachs MF and had a maiden offer in March 2014 that marked overwhelming response. Although this scheme is a MF scheme, it differs from conventional MF schemes as CPSE ETF provides better liquidity, low cost transactions, better yield and a bouquet of safe PSUs.

According to a study report from a leading financial institution, CPSE has given CAGR of over 17 per cent (for retail category) since inception and has outperformed Nifty on any short to long term parameters. CPSE ETF has a special CPSE Nifty index that was formed on 1^st January 2009 with a base value of 1000. First CPSE ETF scheme comprised of 10 selected PSUs (Maharatna and Navratnas) and were selected on investor-friendly criteria. List included ONGC, Coal India, Oil India, IOC, Gail, Container Corp., Bharat Electronics, Engineers India, Power Finance and Rural Electrification. It also had a loyalty addition as well as bonus contents. These companies had a different ratio of weightings in the CPSE Nifty. Selections of these companies were done on following characteristics:

Having more than 55% government holding (stake via Govt. of India or President of India) under promoter category and
Having average free-float market capitalization of more than Rs 1,000 crore for six month period ending June 2013
Having paid dividend of not less than 4% including bonus for 7 yrs immediately preceding or for at least seven out of the eight or nine years immediately preceding, are considered as eligible companies as on cut-off date i.e. 28-Jun-2013.

A report by Trust Investment Advisors has also done a comparison of ETF with other investment alternates. The table is given below for investors' reference.

Comparison of ETF with other Equity Linked Instruments

Parameter	Stock	Index Funds	Equity MF	ETF
Safety	Low to Medium	High	Medium	High
Liquidity	Low to Medium	High	High	High
Return	Wide Range - Low to High	Medium	Wide Range - Low to High	Medium
Transaction Cost	Low	Medium	High	Low

First CPSE ETF offer was for Rs 3000 crore. Now for the second CPSE ETF Reliance Mutual Fund has got the nod and is likely to generate Rs 5000 crore for exchequer.

According to sources, Group of Ministers are likely to meet on Monday (09.01.2017) to consider the norms for the second CPSE ETF issue that will include loyalty as well as bonus contents and this time, EPFO like funds will be allowed to park 15% against 5% limit announced earlier.

As the asset class has strong fundamentals, CPSE ETF has outperformed and hence the second offer will provide a better option of investment for retail investors and pension funds. Issue is expected by the end of this month ahead of budget.

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About Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

5 Comments

5. Mr. relianble

| Link|January 30, 2017 1:30:17 PMReply

cpse allocation prices is Rs. 25.2141 .....................

4. shridhar

| Link|January 22, 2017 10:47:54 AMReply

What is the final rate for allotmen? ??

3. Vikas Golchha

| Link|January 19, 2017 8:11:22 AMReply

What date will be considered for reference price for the CPSE ETF issue?? No article answers this. Will it be the allotment date or issue opening date or issue closing date??

3.1. parmod gupta

| Link|January 20, 2017 6:04:41 AM

Answer of some question regarding CPSC FFO 2

This is a extention of first tranche

First Tranches was 3000 Cr in thia Anchor investor - FII - Corporate - Institution all participate

But In this CPSC 2 fund size is 6000 cr out of 1800 Cr for Anchor investor which start on 17 Jan

And 4200 Cr for Retail investor which start on 18 to 20 Jan 2017

First chance for Retail if not fully subscribe than for others like pension fund - Retirement fund and corporates etc

Allotment on proportionate base

No first come first serve base or No lottery system

Each and every retail investor will get allotment.

Allotment on Average price of 18 19 20 jan NAV for example CPSC ETF on

18 Jan 26
19 jan 26.50
20 jan 27

Than allotment on average of 3 days means @ 26.50

For Anchor investor 1 month lock in period

Foe Retail investor there is no lock in period

Floating is very high in this bcoz when come in 2014 that time pension fund and Retirement fund were not allowed to invest in ETF but Now Govt allow to them to invest 5 % in ETF so demand will be very high bcoz they buy for 5 years and 10 years veiw and this ETF have highest Dividend yeild and almost 15 % CAGR return so on listing Retailer can easily sold with full liquidity.

5 % Discount for Retail

Earlier it was name on goldman sach But goldman mutual fund take over by Reliance mutual fund so its call Reliance CPSC ETF FFO

All PSU basket companies in this CPSC are giving Dividend continue last 10 years.

Documents are required for this CPSC ETF

1.Cheque ( No third party allowed)

2.client master list or Demat holding statement (No original required)

3.Pan card xerox

4.KYC form

2. SJ

| Link|January 13, 2017 9:32:02 PMReply

I have 2 questions.
1) If one has planned total 10 L to invest in equities throught year 2017, how much of it should one invest in this CPSE ETF?
2) If the underlying stocks in this ETF declare devidends/split/bonus etc, is the ETF holders eligible for getting devidents/bonus or respectively ETF value gets increased/changed?

1. HSquare

| Link|January 13, 2017 2:26:30 PMReply

Would you please guide regarding how to apply in this ETF, Online or offline?

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