A Guide To Investing In Cpse Etfs

The Central Public Sector Enterprises Exchange-Traded Fund (CPSE ETF) is an Indian investment fund that offers investors the opportunity to invest in a diversified portfolio of public sector companies, providing exposure to various sectors and industries. The fund was launched by the Ministry of Finance in 2014 as part of the government's disinvestment programme. CPSE ETF is passively managed and tracks the performance of the Nifty CPSE Index, which consists of units of central public sector enterprises. The fund's performance is directly linked to the constituent companies of the index, and it is managed by Nippon India Asset Management Company. Investment in CPSE ETF can be considered a pure equity investment, with no diversification in asset classes. The minimum investment amount is ₹5000 and there is no lock-in period. Investors can buy CPSE ETF units directly from the website of the fund house or through platforms like MF Central and MF Utility.

Where to buy CPSE ETF units

CPSE ETF units can be purchased directly from the website of the fund house, such as Nippon India Mutual Fund. Alternatively, investors can use platforms like MF Central and MF Utility. For those who are uncomfortable with buying mutual funds online, a mutual fund distributor can help with the process. Many banks also act as mutual fund distributors, so you can connect with your bank for assistance.

CPSE ETF can also be bought with a Demat trading account, similar to normal exchange-traded funds. This option is offered by platforms like HDFC securities.

CPSE ETF minimum investment

The Central Public Sector Enterprises Exchange-Traded Fund (CPSE ETF) is a passive investment fund with no lock-in period that was created to help the Government of India with its initiative to disinvest in some selected CPSEs. The CPSE ETF is based on the Nifty CPSE index and includes 11 listed Central Public Sector Enterprises.

CPSE ETF can be purchased from the website of Nippon India Mutual Fund. It can also be bought through platforms like MF Central and MF Utility. Additionally, most banks also act as mutual fund distributors, so you can connect with your bank for assistance.

The minimum CPSE ETF investment amount is 1 unit when purchased through the stock exchange, and 25,000 units when purchased directly from the mutual fund. The latest available data from August 2023 shows that the CPSE ETF's Net Asset Value (NAV) is ₹47.0010.

It is important to note that CPSE ETF is considered a very high-risk investment. Investors should be aware that there is no guarantee that the investment objective of the scheme will be achieved.

CPSE ETF tax benefits

CPSE stands for Central Public Sector Enterprises Exchange Traded Fund. It is a government-initiated investment fund comprising shares of multiple central public sector enterprises. This fund allows investors to invest in top public sector undertakings, offering diversification and the potential for steady returns.

Tax Efficiency

CPSE ETFs offer potential tax efficiency for investors. In the recent budget presented by the Finance Minister, Nirmala Sitharaman, it was announced that investments in CPSE will receive tax benefits akin to those from Equity Linked Savings Schemes (ELSS). Currently, investments of up to ₹1.5 lakh in ELSS are eligible for tax deductions under Section 80(C) of the Income Tax Act. However, the exact plan and clarifications on slabs for tax benefits on CPSE ETF investments are yet to be outlined.

Rajiv Gandhi Equity Savings Scheme

Investors in CPSE ETFs can benefit from tax advantages under specific government schemes, such as the 'Rajiv Gandhi Equity Savings Scheme', subject to prevailing tax laws. This adds to the tax efficiency of investing in CPSE ETFs.

Liquidity

The high liquidity of CPSE ETFs is another factor that contributes to their tax efficiency. Being traded on stock exchanges, investors can easily buy or sell their ETF units, providing flexibility and ease of transaction similar to trading individual stocks. This liquidity also enables investors to quickly access their funds when needed.

Diversification

CPSE ETFs offer a diversified portfolio of major public sector companies across various sectors, reducing the risk of relying solely on the performance of a single company or sector. This diversification can help investors optimise their tax strategies by spreading their investments across multiple sectors and companies.

Government Backing

The involvement of the Government of India in CPSE ETFs provides a level of stability and reliability. This government backing can make CPSE ETFs a safer investment option, particularly during market volatility. The government's support may also bring added security and peace of mind to investors, especially in uncertain economic times.

CPSE ETF performance

The CPSE ETF is a passive investment fund with no lock-in period that was created to help the Government of India divest some of its stake in selected CPSEs through the ETF route. The fund seeks to provide returns that, before expenses, closely correspond to the total returns of the securities as represented by the CPSE Index. As of 21 August 2023, the Net Asset Value (NAV) of CPSE ETF was ₹47.0010. The fund has delivered 11.12% returns since its inception over 9 years and 4 months ago.

CPSE ETF had an AUM (Assets Under Management) of ₹22,537 crore as of 31 July 2023. The fund's performance has been rated as "Very High Risk" by SEBI's Riskometer. As of 31 July 2023, CPSE ETF had invested 99.97% in equity, 0.03% in Cash & Cash Eq., and 0% in debt. The fund's top holdings include the Oil & Natural Gas Corporation and the Power Grid Corporation of India.

The CPSE ETF has a low expense ratio of 0.05% and a minimum SIP amount with no lock-in period. The fund can be purchased directly from the website of the fund house, Nippon India Mutual Fund, or through platforms like MF Central and MF Utility. Investors should note that CPSE ETF is mandated to invest at least 80% of its assets in the shares of public sector (PSU) companies.

CPSE ETF fund managers

The CPSE ETF fund managers are responsible for investing the fund's assets in accordance with the fund's mandate and investment strategy. As per the CPSE ETF's mandate, the fund managers are required to invest at least 80% of the fund's assets in the shares of public sector companies, also known as PSU companies. The fund aims to replicate the portfolio of its chosen benchmark index, which is the CPSE Index.

The CPSE ETF fund managers follow a conservative investment strategy by primarily investing in Large Cap stocks and debt instruments. As of 31st July 2023, the fund had invested 99.97% in Equity, 0.03% in Cash and Cash Equivalents, and 0% in Debt. The top holdings of the CPSE ETF include the Oil and Natural Gas Corporation and the Power Grid Corporation of India.

The fund managers aim to provide returns that closely correspond to the total returns of the securities represented by the CPSE Index. The CPSE ETF has delivered 11.12% returns since its inception over 9 years and 4 months ago. It is important to note that the CPSE ETF is considered a Very High-risk investment according to SEBI's Riskometer.

The CPSE ETF is a passively managed fund, which means that the fund managers replicate the portfolio of the chosen benchmark index rather than actively selecting investments. This passive investment strategy helps the Government of India in its initiative to disinvest in selected Central Public Sector Enterprises (CPSEs) through the ETF route.

Overall, the CPSE ETF fund managers follow a conservative investment strategy by investing primarily in Large Cap stocks and focusing on providing returns that correspond to the CPSE Index.

Frequently asked questions