CPSE ETF Opening on 20.03.2019 – Should you Invest!!

The Govt. of India needs money to run, manage, and expand the economy of the country. The Govt. earns money mainly through Taxes and Disinvestment (selling their shares in Govt. PSUs to Public).

A disinvestment is a tool via which Govt. sells its stakes in the Stock Market and in return gets the desired funds. Therefore, in 2014 the Govt. has launched CPSE ETF. The CPSE ETFs in 2014 was listed at 10% gain at 19.45 against an offered price of Rs.17.45. Till then 3 tranches have been launched and in every tranche, the govt has offered a discount of 5%, 3.5%, and 4.5% respectively. The Govt. is offering a discount of 4% in this current ETFs. The benchmark index is Nifty CPSE. The Fund Offer is managed by Reliance Nippon AMC.

What is ETFs?

1. Can be sell and buy any time of the day.
2. They can be listed on Exchange.
3. Brokerage is low.
4. New Units are offered only through new Tranches.

Top 10 Holdings in CPSE ETF:

Index constituents

Weightage

ONGC 20.43%
NTPC 19.54%
Coal India 19.09%
Indian OIl 18.45%
REC 6.65%
Power Fin Corporation 6.07%
BEL 4.02%
Oil India 2.81%
NBCC 1.45%
NLC 0.62%

This Index though consist of 11 PSUs but more than 75% stakes is consist of ONGC, NTPC, Coal India and Indian Oil. There is no lock-in period for Retail Investors. They can sell it on the very next day of allotment.

Performance and Valuation of the CPSE ETFs since inception:

The CPSE ETFs has given a return of 7.21% since inception. The fund is available at P/E of 8.43 as compared to 26.32 on nifty. So we can say the fund is available at an attractive valuation. The fund has an attractive dividend yield of 5.5% as well.

How to Apply?

The investors can apply through ICICI MFs website, HDFC Securities app, Zerodha App or many other portals. In the case of oversubscription, the ETFs units will be given depending upon the number of application.

Should You Invest?

The 4th Tranche opens up for retail investors on 20 March 2019 and closes on 22 March 2019. The Govt. is offering a discount of 4% in the current CPSE ETF. The Index consist of only PSU stocks and the performance of the PSU stocks in the last 5 years is not attractive neither does the future the way Govt. is eating out the reserves by a way of dividend or Buyback to meet their disinvestment target. The CPSE ETFs though we can say is available at an attractive valuation but it has more to do with the underperformance of the fund. The CPSE ETFs is a good option for short ( Listing gain) to mid term and but certainly not a long term bet the way PSUs stocks have underperfomed.

    I tried mentioned Link For Allotment Status…but its showing NO DATA FOUND

      Even I’m unable to understand… I didn’t get the allotment in demat yet.

    Sir ji, allotement kab aur kitni price me hoga apki hisab se.?

    Form bechna chahiye ya nahi?

      ALLOTMENT price and unit allotment ratio? Will retail investors get firm allotment as was the case in Bharat 22 etf? Please reply.

    I have invested 1 lac in it. Will exit after making net 2-3% of profit on listing.

    Do not invest for long term in govt PSUs or ETFs. Just invest for discounts of 4-5% in NFO or IPOs.

    Govt is biggest stock market manipulator.

    Mostly Govt. companies are down almost 2-4% today. What will be the impact of this?

      How much listing gain is expected? Is there any risk associated with this?

      I’m thinking to invest 1 lac and sell on the listing day in the market.

    Coal India turning ex on 22nd Mar for dividend. Weighted average price will be higher due to higher price on 20th and 21st.

    21st March is holiday for Holi. How will be weighted average price taken?