Govt looks to raise Rs 3,500 cr via CPSE ETF which opens tomorrow

New Delhi: The fifth tranche of the Central Public Sector Enterprises (CPSE) Exchange Traded Funds (ETFs) will be launched for subscription on Tuesday for anchor investors, where the government will seek to raise at least Rs 3,500 crore. Non-anchor investors can submit their bids from Wednesday to Friday. Since the fund is concentrated and susceptible to high volatility, first-time retail investors and long-term equity mutual fund investors must keep away from thematic funds even with low valuations and the discount on offer, according to financial planners.

ONGC, IOC, CIL and NTPC top four holdings

Managed by Reliance Mutual Fund, the CPSE ETF has a concentrated portfolio spread across a number of sectors, including oil PSU, energy, PSU financials and infrastructure & engineering. Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC), Coal India Ltd (CIL) and NTPC Ltd, all four making up the top four holdings, account for 77.7 percent of the portfolio.

The Nifty CPSE Index trades at a PE (price-to-earnings) ratio of 8.43 compared to the Nifty 50 PE of 26.32. Compared to Nifty 50’s 1.25 percent, it offers a dividend yield of 5.52.

“First-time investors would be better off with a well-diversified equity mutual fund than a thematically concentrated portfolio,” said Anup Bhaiya, MD and chief executive officer, Money Honey Financial Services.

“Mutual fund investors would do well to invest in actively managed equity mutual funds where chances of alpha creation are high as compared to passively thematic basket of government companies,” says Jignesh Shah, founder, Capital Advisors.