Looking to invest in PSUs? CPSE ETF is an option. Here’s what you should know

What is CPSE ETF?
Central Public Sector Enterprises Exchange Traded Fund (CPSE ETF) is an open-ended ETF that was launched in Mar 2014. Though an ETF is a type of a mutual fund, usually, you can trade (buy/sell) the units on a stock exchange via a trading account.

Now that you know what is CPSE ETF, let’s look at the portfolio composition of the fund. CPSE ETF operates a concentrated portfolio that consists of stocks with a 20% weight on the underlying index, i.e. Nifty CPSE Index. Currently, the ETF invests in stocks of 11 public companies that belong to the energy and oil sectors:

  • Bharat Electronics
  • Coal India
  • IOC
  • NTPC
  • NBCC India
  • NLC India
  • ONGC
  • Oil India
  • PFC
  • REC and
  • SJVN

Who manages CPSE ETF?
CPSE ETF is managed by Nippon Life India Asset Management, which was formerly known as Reliance Nippon Life Asset Management.

CPSE ETF price
The fund is listed on both NSE and BSE. You can track the CPSE ETF price on NSE here. In addition to the CPSE ETF price, Tickertape also displays an investment checklist detailing the things to look at before investing in units of CPSE ETF so you can make an informed investment decision.

You can also have a look at the key metrics of CPSE ETF and other stocks that you wish to track to gain more insights.

Salient features of CPSE ETF
Understanding the characteristics of the Central Public Sector Enterprises Exchange Traded Fund also helps in gaining deeper insights into the fund and making good decisions. Here you go.

CPSE ETF units are issued at a discount
Each tranche of CPSE ETF is offered at a discount, which has been between 3% and 5%. Usually, a large group of investors, mainly institutional investors, invest in this ETF to benefit from the discount and exit the fund shortly. However, investing in the fund for short-term just to benefit from the discount would not be feasible for retail investors who don’t put in large sums in the avenue.

CPSE ETF doesn’t guarantee outperformance
As you know, mutual funds are managed by professional fund managers. Thanks to their expertise, you can enjoy decent returns on the fund while also minimising the risks. However, in case the manager’s judgement turns out to be wrong for any reason, you would also have to partake in the loss incurred by the fund. Fortunately, CPSE ETF is protected from such a risk as the fund passively tracks the Nifty CPSE Index. Still, this doesn’t mean that the ETF guarantees outperformance because the Nifty CPSE index, the benchmark that the ETF follows, is custom-built. But, how does that matter?

Typically, a fund benchmarked against a broad-based index such as Nifty or Sensex is better protected from the fund manager’s errors. Because, indices based on broad market capitalization filter out the stocks of companies that lose the market-cap automatically and vice-versa, without manual intervention. Meaning, the loss incurred by the fund on this account is limited to an extent. However, since Nifty CPSE index is custom-built the replacement of stocks doesn’t happen automatically. This is why CPSE ETF may not be well-insulated from loss of m-cap of the constituent companies. Continue reading other salient features of CPSE ETF and the minimum investment requirements here.

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