New ETF under RGESS tax benefit- high risk high return model

CPSE ETF:  CPSE is nothing but Central Public sector Enterprise such ongc,sbi,gail,etc.. , is an ETF which suits for long term investors, where new retail investors can claims tax benefit under RGESS(50% tax claim)  upto Rs:50,000 i.e if you invest 10k you can claim for 5K tax benefit. And the minimum lock-in period is 1 year, but we can extend the tax benefit for additional 2 more years. 

Goldman Sachs, which got the mandate from the Government of India for marketing the CPSE ETF, has announced the details of the NFO(New fund offer) that is opening for subscription for Anchor Investment on 18.03.14 and for Non-Anchor investors from 19.03.14 to 21.03.14. 

Please click here for official ad.

What is CPSE ETF?

CPSE ETF is a unique opportunity for investors to invest in 10 Maharatnas, Navratnas and Miniratnas at a discount of 5% on the “Reference Market Price” of the underlying shares of CPSE Index, which will be offered to the CPSE ETF by the Government of India. 

This is one of the novel disinvestment way initiated by  GOI to generate 3000cr, thereby it achieves the revised disinvestment target of 16000cr for FY'14.  

Basket of Companies which comes under CPSE index: 

Company Name	Sector	% Weightage
Oil & Natural Gas Corporation Ltd.	Energy	26.72
GAIL (India) Ltd.	Energy	18.48
Coal India Ltd.	Metals	17.75
Rural Electrification Corporation Ltd.	Financial Services	7.16
Oil India Ltd.	Energy	7.04
Indian Oil Corporation Ltd.	Energy	6.82
Power Finance Corporation Ltd.	Financial Services	6.49
Container Corporation of India Ltd.	Services	6.4
Bharat Electronics Ltd.	Industrial Manufacturing	2
Engineers India Ltd.	Construction	1.13

Advantage of investing in CPSE ETF:

1. Offers Tax Benefits as the Scheme is in compliance with the provisions of Rajiv Gandhi Equity Savings Scheme, 2013 (‘RGESS’). 

2. We get the CPSE ETF at 5% discount rate( refrence market price).

3. CPSE index had a PE ratio of 10.52 and dividend yield of 3.51%.

4. One Loyalty unit will be awarded for every 15 units hold by retail investor for more than 1 year. 

5. provides consistent dividend every year.

Comparison b/w other ETF's

* as on feb28

How to buy CPSE ETF: 

• Need to have DP(Depository Account) to subscribe for this NFO. 
• and we can apply via equity brokerage house like karvay,Geojit,etc.

Other advantage: 

Good time to invest in Central public limited companies at this point of time, Since more than 55% amount of fund money will be spend on sector which is turning around with stable oil price and less loss making due high diesel price. Also due to is cheaper valuations book value of the CPSE index is only 1.8 and PE ratio is only 9.8. And apart from this it pays attractive dividend y-o-y with good dividend yeild at 3.77% which is one of the index which yields high returns in comparison to other ETF's in the table above.  

Happy investing !