Insights

Product Note on Goldman Sachs CPSE ETFs

March 19, 2014 . Vidya Bala

What It Is

An Exchange Traded Fund (ETF) that has a basket of 10 public sector stocks that will track the CPSE Index.

This index, which will be used to facilitate the Government of India’s initiative to disinvest some of its stake in large public sector companies, currently has a basket of large stocks that are low on valuations as the sectors in which they operate – power, oil and gas, and capital goods are out of favour.

What You Get

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• A basket of large public sector companies that are high on dividend yield and low on valuations, when compared with the market. Please see the table above to see the difference in valuations of the CPSE index with the rest of the market.
• Discount of 5% on the “Reference Market Price” of the shares in the index shall be offered to all investors during the NFO.
• The ETF is eligible for tax benefits under the Rajiv Gandhi Equity Savings Scheme 2013, if you are a first time investor in shares by opening a new demat account, or have not used your demat to buy any shares/securities.
• Get Loyalty Units – One Loyalty Unit will be allocated for every 15 units held by retail investors continuously from the Allotment Date to the Loyalty Unit Record Date, which will be 1 year from the NFO allotment date.

NFO Pricing

The price allotted to you will be the average (volume weighted average price) price of each of the stocks traded in the exchange during the NFO period, that is March 19-21. A discount of 5% will be applied on each of these to give you the final allotment price of the ETF.

You can invest a minimum of Rs. 5000 and in multiples of Re 1 thereafter.

Suitability

• If you are looking to invest in shares of large public sector companies at a discount to market price.
• If you are looking for exposure to cyclical themes such as power, and oil and gas, that may be beneficiaries of regulatory changes and economic recovery.
• If you are looking for high dividend yield companies – the dividend yield of the CPSE Index is at present 3.77% as against 1.49% for the Nifty basket.
• If you are looking for tax benefits under RGESS.

The NFO opens on March 19 and closes on March 21. You can click here to start investing.

For more information on the product, please click here.

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