Minus extra benefits, CPSE ETF loses charm

The public-sector company themed fund makes sense for investors with well-diversified portfolios 

t’s been a month since the Government of India off-loaded a part of its stake in state-owned companies through an exchange-traded fund (ETF); a first in India. Goldman Sachs Asset Management Co. (India) Ltd’s Central Public Sector Enterprise Exchange Traded Fund (CPSE ETF) was launched on 18 March. Equity shares of 10 public sector units (PSUs) worth Rs.3,000 crore, which were owned by the central government, were on offer through this ETF. The fund overshot the target of Rs.3,000 crore by collecting Rs.4,400 crore and allotting units proportionately to unitholders at a price of Rs.17.45.

As it turns out, unitholders have already made a gain of 14% between the day it got listed (4 April) and 28 April.

On the other hand, there is ample liquidity on the National Stock Exchange (NSE) for the ETF. Between 9 April and 25 April, on an average 360,000 units were traded daily, according to Bloomberg data. The recent run-up in the stock markets has pushed up the prices of PSUs. Since mid-February 2014, while CNX Nifty has risen 11.9%, CPSE index has risen 16.58% and CNX PSU index 40.52%, mostly in anticipation of a new strong central government.

This is a passively-managed scheme that invests its entire corpus in all the scrips, and in the same proportion as they lie in its benchmark index, CPSE index. If you missed investing in the ETF during the new fund offer (NFO) period, should you invest in it now since the fund is listed on the NSE and the Bombay Stock Exchange Ltd?

Reason to invest

In the past two decades, various central governments have shown an inclination towards disinvestment. But bundling up such shares into an ETF basket and selling them on the stock exchange was tried for the first time. At present, Goldman Sachs is the only fund house to have the mandate to manage such a scheme.

NITESH KUMAR SINGH

PGDM 2ND

 SOURCE- MINT LIVE NEWS