Piyush Ashtekar

CPSE ETF Presented By : Piyush V. Ashtekar INDEX 1. Introduction of NIFTY CPSE 2. Stock Selection Criteria 3. Constitution of NIFTY CPSE 4. Method of Computing an Index 5. What is ETF? 6. What is CPSE ETF? 7. History of CPSE ETF 8. Snapshot of CPSE ETF 9. Why to Invest in CPSE ETF? 10. Performance of CPSE ETF 11. Comparison with Nifty BeES 12. Is it worth to invest in CPSE ETF? 13. Conclusion Introduction of Nifty CPSE • Nifty CPSE Index is constructed to facilitate Government of India’s initiative to disinvestment of its stake in Central Public Sector Enterprises(CPSEs) through ETF route. • The index comprises of selected 11 CPSEs. • The index was introduced on 18th March of 2014 and base value of 1000. • Nifty CPSE index is a type of Thematic Indices. Stock Selection Criteria • Included in the list of CPSEs published by the Department of Public Enterprise. • Listed at National Stock Exchange of India Ltd. (NSE) • Having more than 52% government holding (stake via Govt. of India or President of India) under promoter category. • Companies having average free-float market capitalization of more than 1,000 Cr. for six month period ending August 2018 are selected. • Companies which are IRDA dividend norms compliant shall be considered eligible to be included in the index. Constitution of Nifty CPSE Company Name Weightage (%) Oil & Natural Gas Corporation Ltd. 20.08 NTPC Ltd. Weightage (%) SJVN Ltd. 0.53 19.76 NLC India Ltd. 0.77 Coal India Ltd. 18.94 NBCC (India) Ltd. Indian Oil Corporation Ltd. 18.57 Oil India Ltd. Rural Electrification Corporation Ltd 6.47 Bharat Electronics Ltd. Power Finance Corporation Ltd. 5.96 Power Finance Corporation Ltd. Bharat Electronics Ltd. 4.33 Oil India Ltd. 2.87 NBCC (India) Ltd. 1.71 NTPC Ltd. 19.76 NLC India Ltd. 0.77 Oil & Natural Gas Corporation Ltd. 20.08 SJVN Ltd. 0.53 NIFTY CPSE CMP: 2564.50 Data as on 26th July 2019 - Rural Electrification Corporation Ltd 6.47 Indian Oil Corporation Ltd. 18.57 Coal India Ltd. 18.94 0 5 10 15 20 25 Method of Computing an Index • Nifty CPSE is computed using Periodic Capped Free Float Method, wherein market capitalization of index’s underlying stock is calculated by taking the equity’s price and multiplying by the number of shares readily available in the market. • Free-Float Capitalization method excludes locked-in shares such as those held by insiders, promoters, and governments. • Nifty CPSE Index’s calculation is on a daily basis and Index weightages are rebalancing on a Quarterly basis. What is ETF? • Exchange Traded Funds (ETFs) are essentially mutual fund schemes or index funds that are listed and traded on an exchange just like stocks. • Benefits to Investors:– Can easily be bought/sold like any other stock on exchange through terminals across the country. – Able to put limit orders. – Minimum investment is one unit. – Lower expense ratio. – Delivery in demat account. What is CPSE ETF? • CPSE ETF is an open-ended index exchange traded fund wherein this ETF employs a passive investment approach designed to track the performance of Nifty CPSE Index. • CPSE ETF seeks to achieve this goal by investment in securities constituting the Nifty CPSE Index in the same proportion as in the Index. • CPSE ETF is managed by Fund Manager Mr. Vishal Jain of Reliance Nippon Life Asset Management Limited. History of CPSE ETF • CPSE ETF was launched for the first time in March 2014. Thereafter, five tranches were offered in January 2017, March 2017, November 2018, March 2019, and July 2019. • Discounts offered in each tranche between 3% to 5%. • The 1st FFO came with an offer of Bonus for every 15 units of ETF held for more than 1 year. CPSE ETF Tranches Issue Period Discount (%) Amount in Crore NFO March 2014 5 3000 1st FFO Jan 2017 5 6000 2nd FFO March 2017 3.5 2500 3rd FFO Nov 2018 4.5 17000 4th FFO March 2019 4 10000 5th FFO July 2019 3 10000 Snapshot of CPSE ETF Why to Invest in CPSE EFT? • The structure of CPSE ETF attracts liquidity from various sources such as buying/selling by investors. There is no fund manager bias. • As CPSE ETF replicates the NIFTY CPSE, the investor can know at any given point of time where and how much is invested in each stock. • Investing in just one unit given exposure to 10 shares of the Nifty CPSE. This allows an investor to spread risk with one single decision. Performance of CPSE ETF As on 26/07/2019 Comparison with ETF NIFTY BeES • ETF Nifty BeES is an open ended ETF wherein this ETF employs a passive investment approach designed to track the performance of Nifty 50 Index. Is it worth to Invest in CPSE ETF? • As per data, CPSE ETF grew at 6.78% CAGR while Nifty BeES grew at 11.53% CAGR from the date of inception of CPSE ETF. • we can say that CPSE ETF has been beaten by the Nifty BeES. • Here we have taken an example for better understanding: A invested Rs. 100,000/- in CPSE ETF as on inception date i.e. 28th march 2014 and while B invested the same amount on the same date in the Nifty BeES. Now as on 26th July 2019, A’s investment became Rs. 141,850/while B’s Investment became Rs. 178,913/-. Conclusion • As we can see that B’s Investment grew at a good CAGR and earn more than A. • The CPSE ETF is highly skewed towards oil and gas as well as power. So here I am not recommending to invest in a CPSE ETF even among PSUs, the investor can select better companies than those in CPSE’s underlying. • If investor invests in CPSE ETF with a purpose of availing the deduction of 80c section of IT Act than Investment decision should not only base on tax saving and there are many tax saving avenues are available. • Here I am concluding that CPSE ETF is not a good investment. Thank you For any Query :-