The Cabinet Committee on Economic Affairs today approved the setting up of a Central Public Sector Enterprises (CPSE) Exchange Traded Fund (ETF), which would comprise CPSE stocks (from amongst the listed CPSE stocks). Each stock would have a fixed weightage in the basket.
The composition of the basket, the launch of the New Fund Offer (NFO), the discount to be provided and other issues relating to contribution and pricing of the ETF would be decided by the Empowered Group of Ministers (EGoM).
This will help in minimizing market disruptions seen in public offerings of listed CPSEs; increase ability of the Government to monetize partial stakes in listed CPSEs, some of which have low liquidity and free float; broad base retails participation of shares of CPSEs, and moreover, help to deepen the market for equity-based products; beneficial to the Government from a pricing perspective as part of the discounts could be back-ended; in the perspective of success of ETFs globally, a CPSE ETF will boost the ETF product in the country, and will help fulfill the domestic investors™ appetite for an equity ETF products as the domestic Indian investor is vastly under-served vis-a-vis the foreign investor community.
CPSE ETF is made up of a basket of shares of different CPSEs, that tracks an index fund, but trades like a stock on the exchange.