PSUs’ ETF gives 56% returns in just 75 days

MUMBAI: Proving a host of sceptics wrong, the UPA government's last endeavour to divest part of its holdings in some public sector undertakings through the exchange traded fund ( ETF) route has proven to be a huge success, more so for retail investors.

Christened CPSE ETF, which was conceptualized and is now also being managed by the Indian arm of Goldman Sachs Asset Management, the scheme has given a return of 55.8% to retail investors in just about two and a half months. To make things even better for small investors, if those who were allotted CPSE ETF units in the NFO ( new fund offer) in March hold on to their investments for a year, they will get one bonus unit for every 15 units held by them—that too at the then prevailing value.

The NFO for CPSE ETF opened in mid-March, the units were allotted at Rs 17.45 each to investors on March 28, and were listed on April 3.

On Tuesday (June 10), the units on the NSE closed at Rs 27.19, thus giving a return of 55.8% to retail investors who got the units at 5% discount to its actual value at the time of allotment.

"This (CPSE ETF basket) comprises some of the finest PSU stocks attractively packaged for investors. The timing was perfect," said Dhirendra Kumar, CEO, Value Research, the leading mutual fund analytics company in India.

"For a long time PSUs were out of favour, but the tide has turned now," he added.
The ETF has 10 PSU stocks in the basket, with ONGC, Coal India and GAIL being the top three in terms of weightage. Other stocks in the basket are REC, PFC, Indian Oil, Container Corp, Oil India, Bharat Electronics and EIL. The concept works like mutual fund units but the scrips are listed on the exchanges and their prices, on a real time basis, are directly linked to the value of an index that is managed by an arm of the NSE. Currently, the average daily traded volume in the ETF is about Rs 10 crore.

"The CPSE ETF has seen active investor interest, healthy volumes and a price appreciation in excess of 50% over its March allotment price," said Sanjiv Shah, CEO, Goldman Sachs Mutual Fund, who worked with the government on the concept for nearly two years and was instrumental in launching the product in India.

Although the NAV ( net asset value) of the ETF units has appreciated by nearly 56% in a little over two months, financial advisors said it was better for retail investors to hold on to these units till March 2015. This is because in addition to a huge expected price appreciation, they will get loyalty bonus of one extra unit for every 15 units they hold since allotment for no extra cost to them. And this loyalty bonus will be at the price of the ETF in March 2015, not at the price at which they were initially allotted to retail investors.