CPSE Index and CPSE ETF – All you need to Know

(Last Updated On: January 19, 2017)

Exchange traded funds though globally very popular have not been very popular in India.Key reasons include their relative underperformance as compared to mutual funds, and unlike lack of distance unlike the US no special tax incentive for investors.General lack of width of good ETFs has also contributed to luke warm growth. With the launch of CPSE exchange and followed by CPSE ETF.There is a renewed push for investors to invest in ETFs.

What is CPSE Index

CPSE Index is a special index created on NIFTY to help the government of India to divest some stake in Public sector enterprises. CPSE index comprises of 10 Public sectorc companies or Navratanas as they are popularly called

 List of companies in CPSE Index

  1. ONGC  — 24.51 %
  2. Coal India Ltd — 20.68%
  3. Indian Oil Corporation limited — 18.08%
  4. Gail (India) Ltd — 11.25%
  5. Power Finance corporation limited — 5.62%
  6. Rural Electrification Corporation Ltd — 5.25%
  7. Container Corporation of India Ltd — 5.08%
  8. Bharat Electronics Ltd. — 4.36%
  9. Oil India Ltd. — 3.41%
  10. Engineers India Ltd — 2.28%

Sectoral representation of CPSE Index

SectorWeight(%)
ENERGY 57.25
METALS20.68
FINANCIAL SERVICES 10.87
SERVICES5.08
INDUSTRIAL MANUFACTURING4.36
CONSTRUCTION 2.28

What is CPSE ETF

CPSE ETF is an exchange traded fund which will invest in CPSE index stocks. This ETF will be listed on NSE and will be traded on NSE.  CPSE ETF was launched in 2014 and since then has traded on NSE. Currently, government is pushing for an FFO ( Further fund offer) which is open for non-anchor investors  from Jan 18th to Han 20th 2017

READ  ETF vs Mutual Funds: Review, Difference, Performance

 

The stocks which will be part of the ETF should fulfill following criteria

  1. Should be part of CPSE list published by department of public enterprises
  2. Government holding should be more than 55%
  3. All these stocks should be traded on NSE
  4. Average free float capitalization of Rs 1000 crores

List of companies as part of CPSE ETF have discussed above.

ETF

Performance of CPSE ETF

CPSE Performance

The above chart tracks CPSE index performance versus Nifty50 index you can se

Key Features of CPSE ETF

  1. Will track CPSE index
  2. Is available at a discount of 5 % as part of the introductory offer
  3.  Government is throwing in tax benefits as part of Rajiv Gandhi Equity Savings Scheme
  4.  Is open to non-anchor investors between Jan 18th and Jan 20th 2017

Advantages of CPSE ETF

  1. 5% discount if you invest in the offer period
  2. The return on the ETF has been about 12.21 % since the ETF launched back in 2014
  3. It provides you exposure to companies are the building blocks for our economy and given that economy keeps growing these companies may do well
  4. Its traded on the exchange hence you can sell it anytime

Disadvantages of CPSE ETF

  1.  Most of the companies are PSUs which come with normal efficiency issues associated with PSUs
  2. Government interference and policies can impact performance of some of the PSUs

 

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