Un­ex­pect­edly, CPSE ETF Has Proven to be an In­ter­est­ing Idea

The Economic Times - - Companies & Economy: Pursuit Of Profit -

bonus was paid out, made much more — about 35% in half the time. With­out the in­cen­tives, the re­turns would be just about 4.5% p.a.

For the govern­ment, funds like the CPSE ETF of­fer an on-de­mand, instant di­vest­ment route that is al­ways open. This is the so­lu­tion to a dif­fer­ent prob­lem than was talked about when the such a fund was first mooted a few years back. At the time, the idea was that a PSU ETF could be used to bun­dle less de­sir­able PSU stocks with more saleable ones, sort of like what your pro­vi­sions store does to get rid of hard-to-sell items. That idea was ba­si­cally a con job. By con­trast, the CPSE ETF con­sists en­tirely of in­vestible PSUs. ETFs are al­ways based on an in­dex. The CPSE fund’s un­der­ly­ing in­dex was a new in­dex of the same name that the NSE con­structed specif­i­cally for this fund. This in­dex had 10 stocks as its com­po­nents. Th­ese were Coal In­dia, GAIL, ONGC, In­dian Oil, Bharat Elec­tron­ics, Oil In­dia, PFC, REC, Con­tainer Corp and En­gi­neers In­dia.

For the govern­ment, this should be an idea worth ex­plor­ing fur­ther. Even if it has to sup­ply an an­nual stream of in­cen­tives for in­vestors who stick around for a year, it pro­vides an av­enue for con­tin­u­ous dis­in­vest­ment that can get easy par­tic­i­pa­tion from all classes of in­vestors, in­clud­ing the re­tail in­vestors that it cov­ets. For in­vestors, the in­cen­tives could pro­vide a cush­ion that makes a PSU ETF a lit­tle less risky to buy.

Nor­mally, it’s not the wis­est thing to buy any spe­cialty fund. Gen­er­ally, a spe­cialty or a the­matic fund has to be based on a sec­tor or some other in­vest­ing idea, like banks or IT or consumer goods or auto or some­thing else that an in­vestor may think will do bet­ter than the rest of the mar­ket. Funds like CPSE ETF aren’t like this. In­stead, they are a the­matic fund where the theme hap­pens to be the pro­moter. How­ever, if the pro­moter knows that it has to put some ic­ing on the cake to sell it, then it may not be a bad idea.

De­spite the hand­i­caps, the fund that was launched 2 years ago, could be the tem­plate for fu­ture di­vest­ment suc­cess

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