CPSE ETF

The Central Public Sector Enterprises Exchange Traded Fund (CPSE ETF) comprising the shares of 10 blue chip PSUs was listed on the BSE and NSE platforms on 41 April, 2014. The Government of India expected to raise a corpus of Rs. 3,000 crore through the fund while it got over-subscribed to the tune of Rs. 4,300 crores.

This scheme is conceived by the Government of India as a means to disinvest a part of its holding in Public Sector Units (PSUs) and would be managed by Goldman Sachs Asset Management (India) Pvt. Ltd., a mutual fund company that specialises in managing exchange traded funds.

ETF is a security that tracks an index, a commodity or a basket of assets such as an index fund, but trades like a stock on an exchange – the CPSE ETF tracks the CPSE Index (of 10 PSUs included in the ETF). CPSE Index has been constructed by including companies that meet the following criteria:

(i) Owned 55 per cent or more by the GoI and listed on the NSE;

(ii) Large PSUs (those having more than Rs.1,000 crores as average free float market capitalisation for six months period ending June 2013); and

(iii) With a consistent dividend payment record (at least 4 per cent for 7 years immediately prior to or 7 out of 8/9 years immediately prior to June 2013).

The ten blue-chip PSUs which meet the above criteria and their weightages are: ONGC (26.72 per cent); GAIL (India) (18.48 per cent); Coal India (17.75 per cent); REC (7.16 per cent); Oil India (7.04 per cent); IOC (6.82 per cent); Power Finance Corp. (6.49 per cent); Container Corp. (6.40 per cent); Bharat Electronics (2 per cent) and Engineers India Ltd. (1.13 per cent).

CPSE ETF will invest the corpus in the above-given companies as per the given weightage. Hence, subject to the tracking error and expenses, CPSE ETF’s returns will closely correspond to the CPSE Index returns.

Meanwhile, the Government has announced (Union Budget 2017-18) to launch a new ETF with diversified CPSE stocks and other Government holdings in the fiscal 2017-18.