Recently, the third tranche of the Central Public Sector Enterprise (CPSE) exchange traded fund (ETF) hit the markets. Since its fresh fund offering by Reliance Mutual Fund in 2014, the CPSE ETF has made two more fresh fund offerings.
An ETF is an equity security that tracks an index and can be traded on a stock exchange. The CPSE ETF is made up of equity investments in 10 of India’s largest public sector companies. The biggest of these are ONGC, REC, Coal India, Container Corp, Oil India, Power Finance, GAIL, BEL, EIL, and Indian Oil.
Salient features
The CPSE ETFs are open-ended funds with no lock-in. They can be bought and sold on a stock market. They are pure equity investments, and you need to make a minimum investment of `5,000. ETFs are passive funds. It means that the proportion of the underlying assets remains the same. Therefore, the portfolio of the ETF remains the same unlike a mutual fund that will be actively managed. Resultantly, ETFs have a low expense ratio. In the CPSE ETF’s case, this ratio is 0.54%—lower than the expense ratio of a typical mutual fund which would range between 1-3%.
