As we all know, the Indian government intends to privatise some public sector enterprises (PSUs) to raise funds for development projects while also promoting transparency in their performance. The CPSE ETF is a themed fund that is part of the government's disinvestment strategy, which involves selling stakes in various PSUs. Please continue reading for more information about the CPSE ETF, including its characteristics and benefits.

What is CPSE ETF?

The CPSE ETF is an open-ended thematic public-sector equity plan that invests in government-owned firms with funds from multiple investors. The fund operates similarly to a mutual fund scheme consisting of scrips of ten PSUs listed on stock exchanges and transacted as shares. These ETFs are included in the Nifty CPSE Index. By purchasing a single unit of this ETF, the customer receives a part of each of the underlying PSUs.

CPSE ETF is passively managed that allows you to gain exposure to the best central government firms with Navratna and Maharatna ratings. The Scheme's NAV responds or fluctuates to the movements in the broader securities market, and an investor can also participate through a systematic investment plan.

What are the Key Features of the CPSE ETF?

Some of the fund's key characteristics are listed below.

• The expense ratio of the CPSE ETF is low compared to any actively managed mutual fund scheme. This ensures you get better returns.

• Because the invested capital is allocated to purchase equity ownership in strong public-sector enterprises, investing in this fund is considered a pure equity investment. Accordingly, there is no asset class diversification.

• The CPSE ETF requires a minimum investment of Rs.5,000. Moreover, there is no investment lock-in period because it is an open-ended scheme. The fund units can be easily traded on the Indian stock exchanges. An investor can use a SIP investment calculator to determine the expected returns based on the monthly SIP amount invested.

• New units are only made available through further tranches.

• The fund is IRDAI-compliant and government-backed.

What Are the Benefits of CPSE ETF?

Among the advantages of investing in the fund are the following:

• First, it is an excellent option to invest in India's best-managed large PSUs.

• You will receive a tax break under Section 80 C of the IT ACT for investing in CPSE ETF.

• Investors with a long-term view can also get loyalty points.

• The government's continued measures to boost efficiency provide additional assurance of a strong ROI.

• CPSE stocks are market leaders in their respective sectors, with consistent sales and profit performance. Furthermore, they offer a generous dividend payout.
• The CPSE ETF investment carries the least risk in terms of entry and exit burden. Rather than purchasing individual PSU stocks, the fund allows you to target CPSEs as a unit.

• During market hours, investors can buy and sell ETF units in real-time at the current market price.

The divestment of some of the largest PSUs has presented ordinary citizens with an excellent opportunity to participate in the development stories of these valued assets. In addition, investors are given a discount during the early phase, making it more appealing. Similarly, tax breaks for purchasing CPSE ETFs, identical to ELSS funds, are an excellent strategy for increasing retail participation in the fund. The best feature is that this fund is accessible to investors through a systematic investing plan.