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Goldman Sachs CPSE ETF

Goldman Sachs launches Central Public Sector Enterprises (CPSE) ETF, an open-ended scheme that consists of shares of 10 major public sector units, including Oil & Natural Gas Corporation, GAIL India and Coal India and it opens for subscription today with the government aiming to raise Rs 3,000 crore.

CPSE-ETF

About the scheme:

The scheme which is open till 21 March 2014, will mirror the returns of the CPSE index from the National Stock Exchange, which is currently at 1855. The CPSE index has ten stocks, chosen on three criteria — a 55 per cent Government holding, a 4 per cent dividend yield, seven-year dividend paying record and a free float market cap of  Rs.1,000 crore or more.

Pros and Cons:

  • Companies making up this fund have been selected for their dividend record in the last seven years, therefore, the fund is likely to receive steady cash flows from its holdings in the form of dividends. This will prop up its returns of the fund. 
  • There is a 5 percent discount for investing in the NFO and also you get a discount in the form of loyalty bonus wherein for every 15 units, you get one unit free after one year.
  • Investing in CPSE ETF is a low-cost route to investing in PSE stocks.

  • At the same time these stocks have had a good run and also some of the stocks are part of the Nifty Index. And any profit booking in Nifty will lead to a substantial correction in these stocks as well. 

Hence, investing in PSE ETF can be considered only if  you can actively track returns and book profits when the stocks run up. Since the ETF is to be listed on the National Stock Exchange, one can wait and watch the performance of the fund and consider investing at a later stage.

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