Use this opportunity to invest in government's ten Maharatnas and Navaratnas
Yes, you read it right. There is a limited window opportunity to invest in some of the leading PSUs: Coal India, GAIL, ONGC, Indian Oil, Bharat Electronics, Oil India, PFC, REC, Container Corp and Engineers India. The Central Public Sector Enterprises Exchange Traded Fund or CPSE ETF is open for fresh round of investments for small investors to consider investing in this ETF.
In March 2014, the CPSE ETF was launched by Goldman Sachs Asset Management India from a mix of 10 Maharatnas and Navaratnas as part of the Government’s disinvestment plan. This time around, the issue size of the fund is Rs 4,500 crore, with the option of raising another Rs 1,500 crore, with the issue open till January 20. The ETF is being managed by Reliance Nippon Life AMC, which is the appointed fund manager for the CPSE.
An ETF is a basket of stocks that reflects the composition of an Index, like the Nifty or Sensex. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Think of it as a mutual fund that you can buy and sell in real-time at a price that change throughout the day, which means it is more like a stock when it comes to its orientation of trading. The CPSE fund's underlying index is one that NSE created specifically for this fund when it was launched.
Investor alert
For those who have never invested, this ETF could be a good choice for it offers all that an investor should consider when investing – diversification and liquidity topping the list. Moreover, there is a discount of 5 per cent on the market price of the underlying stocks. The return on the first tranche of the CPSE ETF is about 12.2 per cent per annum. There was also a 6.66 per cent bonus paid out to investors, which are all the necessary indicators for a small investor to consider investing in this offer.
Normally a new mutual fund scheme when open for investments is known as a new fund offer or NFO. However, for the first time an existing fund is open for fresh investments as part of an investment drive, which makes this offer from the CPSE ETF as a ‘further fund offer’ or FFO, which is a first in the Indian markets. For investors in this ETF, the other factor that goes in their favour is the reality that this is a fund where the investments are in government promoted companies. Effectively, the CPSE ETF will invest in some of the best PSUs, which have a predictable business and a long history to go by.
Although one may argue that this fund has concentrated investments in PSU stocks, the difference in the manner in which this ETF is structured is that it constitutes some of the best PSUs and the ETF has a performance track record which exudes confidence to investors who have never invested before.