CPSE ETF Note - Further Fund Offer of CPSE ETF - Reliance Securities

As part of the disinvestment programme, the Cabinet Committee on Economic Affairs (CCEA) approved the setting up of a Central Public Sector Enterprise Exchange Traded fund (ETF) on May 2, 2013. Initially, the Goldman Sachs Asset Management (India) was mandated to launch and manage the scheme, which was later on acquired by Reliance Mutual Fund in October 2015.

First Tranche: The first-ever CPSE ETF - comprising of scrips of 10 PSEs launched in Mar'14 with the provision of Rs5,000 minimum investment criteria for the retail investors - mopped up Rs3,000 crore for the exchequer.

Second Tranche: The second tranche of fund-raising is part of the Government's divestment plan for FY17 under which it has budgeted to raise Rs56,500 crore. Reliance Mutual Fund through the second tranche of CPSE ETF further fund offer plans to garner an indicative issue size between Rs 4,000-6,000 crore.

Constituents of CPSE ETF

The Index-based fund will be a further fund offer to the existing CPSE ETF, which tracks NIFTY CPSE Index constituting 10 central public sector enterprises. ONGC, Coal India, Indian Oil, GAIL (India), Oil India, Power Finance Corporation (PFC), Bharat Electronics, Rural Electrification Corporation (REC), Engineers India and Container Corporation of India are constituents of the NIFTY CPSE index.

NIFTY CPSE Index Value Calculation Methodology

The Index values are to be calculated on free float market capitalization methodology. The index has base date of 01-Jan-2009 and base value of 1000. Weights of index constituent shall be re-aligned (i.e. capped at 25%) every quarter effective 2nd Monday of February, May, August and November.

What Makes CPSE ETF Attractive Investment Opportunity?

Opportunity to Invest in PSEs via ETF Route: The CPSE ETF provides the opportunity to invest in PSEs through ETF route. While it is a good investment as the PSEs are financially healthy and efficient, the Government's focus to enhance their efficiency is expected to boost returns on investment.

Returns & Dividend Yield: In past 5 years, NIFTY CPSE Index gave absolute returns of 37% (till Dec 30, 2016). The PE ratio of NIFTY CPSE index stands at 11.4x vis-à-vis 21.9x of NIFTY 50 index. The dividend yield of NIFTY CPSE index was 4.1% and that of NIFTY 50 index was 1.4% as on December 30, 2016.

Consistent Performers: PSE stocks have been consistent performers in terms of revenues and profits and had been providing good dividends.

Source : Equity Bulls

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