The CPSE ETF (Central Public Sector Enterprises Exchange Traded Fund) is an exchange-traded fund that primarily focuses on investing in the stocks of Central Public Sector Enterprises (CPSEs) in India. These CPSEs are state-owned entities, and the ETF was launched to provide investors with an opportunity to invest in a basket of these companies.
Key Features:
(1) Launch and Management:
- The CPSE ETF was launched by the Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance in India.
- It is managed by UTI Asset Management Company.
(2) Composition:
- The ETF consists of a diversified portfolio of CPSEs across various sectors, such as oil & gas, power, mining, and heavy industries. Some prominent companies included in the CPSE ETF are ONGC, NTPC, Indian Oil Corporation, Power Grid Corporation, Coal India, and others.
- The companies included in the ETF typically have a significant market capitalization and are key contributors to India’s economy.
(3) Investment Objective:
- The primary objective of the CPSE ETF is to provide long-term capital appreciation by tracking the performance of the CPSE Index, which includes the stocks of public sector companies listed on Indian stock exchanges.
(4) Dividends:
- Investors in CPSE ETFs are eligible to receive dividends, which are distributed based on the underlying companies’ performance and their dividend policies.
(5) Performance:
- The ETF is designed to reflect the performance of the CPSE index, and historically, it has shown attractive returns to investors, particularly those looking for exposure to the Indian public sector.
(6) Tax Benefits:
- Tax-Free Capital Gains: Long-term capital gains (holding period of more than 3 years) from the CPSE ETF are tax-free for individual investors.
- Dividend Taxation: The dividends received from CPSE ETFs are subject to tax at the applicable rate for the investor, depending on the tax bracket.
Investment Considerations:
- Risk Factor: Since it invests in public sector companies, CPSE ETFs tend to be less volatile compared to individual stocks in the private sector but may still be affected by government policies and economic conditions.
- Suitable For: It is typically suitable for conservative investors who seek exposure to blue-chip public sector stocks with relatively stable returns over the long term.
CPSE ETF Schemes:
- There have been multiple tranches of the CPSE ETF, with each offering the chance for retail investors, as well as institutional investors, to buy units of the fund at a discounted price during the offering period.
Investing in the CPSE ETF provides a good opportunity for those looking to tap into India’s public sector while benefiting from diversification, liquidity, and the possibility of government-driven growth in these companies.
CPSE ETF: Top Holdings
(1) Oil and Natural Gas Corporation (ONGC)
- Sector: Oil & Gas
- Weightage: One of the largest holdings in the ETF.
- Description: ONGC is India’s largest state-owned oil and natural gas exploration company. It plays a crucial role in the Indian energy sector and is also involved in refining and marketing of petroleum products.
(2) Indian Oil Corporation (IOC)
- Sector: Oil & Gas
- Weightage: Significant holding in the ETF.
- Description: IOC is one of the largest public sector oil refining and marketing companies in India. It operates in the energy sector and plays a pivotal role in refining, marketing, and distributing petroleum products.
(3) Coal India Limited (CIL)
- Sector: Mining
- Weightage: Another major holding.
- Description: Coal India is the world’s largest coal producer, and its performance is essential to the Indian energy sector. It contributes a significant portion of India’s coal production.
(4) NTPC Limited (National Thermal Power Corporation)
- Sector: Power
- Weightage: A key holding.
- Description: NTPC is the largest power generation company in India, responsible for the generation of electricity from thermal and renewable sources.
(5) Power Grid Corporation of India Limited
- Sector: Power/Infrastructure
- Weightage: Key holding in the ETF.
- Description: Power Grid operates India’s electricity transmission network and ensures the distribution of power across the country.
(6) GAIL (India) Limited
- Sector: Oil & Gas
- Weightage: Important holding.
- Description: GAIL is India’s largest natural gas transmission and distribution company, operating pipelines and offering various gas-related services.
(7) Indian Oil Corporation Limited (IOCL)
- Sector: Oil & Gas
- Weightage: One of the largest weights in the ETF.
- Description: IOCL is a state-owned oil company involved in refining, pipeline transportation, and marketing of petroleum products.
Top Holdings Of CPSE ETF
(8) Oil India Limited (OIL)
- Sector: Oil & Gas
- Weightage: Important contributor.
- Description: Oil India is one of the major players in the oil and gas exploration industry in India.
(9) Steel Authority of India Limited (SAIL)
- Sector: Steel
- Weightage: Included in the ETF.
- Description: SAIL is India’s largest steel producer, contributing heavily to the country’s industrial sector.
(10) Container Corporation of India Limited (CONCOR)
- Sector: Logistics
- Weightage: Key holding in the ETF.
- Description: CONCOR is a leading logistics company, providing multimodal transport services and contributing to India’s trade and transportation sectors.
(11) Bharat Petroleum Corporation Limited (BPCL)
- Sector: Oil & Gas
- Weightage: Significant holding.
- Description: BPCL is a major player in the refining, marketing, and distribution of petroleum products in India.
(12) NHPC Limited
- Sector: Power
- Weightage: Key holding.
- Description: NHPC is involved in the generation of hydroelectric power and is one of the leading players in India’s renewable energy sector.
(13) REC Limited
- Sector: Power Finance
- Weightage: Notable holding.
- Description: REC is a public sector financial company that provides financing to power sector projects.
(14) PFC Limited (Power Finance Corporation)
- Sector: Power Finance
- Weightage: Included in the ETF.
- Description: PFC provides financing to power sector projects in India, ensuring the availability of funds for energy infrastructure development.
Sector-wise Allocation:
- Oil & Gas: Companies like ONGC, IOC, BPCL, and GAIL are prominent in the ETF, reflecting the importance of the energy sector in India’s economy.
- Power & Infrastructure: NTPC, Power Grid, REC, and NHPC dominate the power and infrastructure sectors.
- Mining & Steel: Coal India and SAIL contribute significantly to the ETF’s holdings, representing India’s key mining and manufacturing sectors.
- Engineering & Logistics: BHEL and CONCOR add exposure to India’s engineering and transportation infrastructure.
Conclusion:
The CPSE ETF provides exposure to some of India’s largest public sector companies, spanning critical sectors such as oil and gas, energy, mining, power, and infrastructure. By investing in these top holdings, the ETF aims to track the performance of India’s state-owned enterprises and provide investors with both stability and growth potential. The weightage of each company in the ETF will vary based on market conditions, sector performance, and the government’s disinvestment plans.
CPSE ETF Returns
Here’s a returns table summarizing the historical performance of the CPSE ETF over different time periods, along with the annualized returns. Please note that these are approximate values, and returns can fluctuate based on the market conditions.
CPSE ETF: Historical Returns (Approximate)
| Time Period | Returns (Annualized) | Notes |
| 1 Year | 4% – 8% | Reflecting recent performance. |
| 3 Years | 7% – 12% | Includes both periods of growth and correction. |
| 5 Years | 10% – 15% | Benefiting from strong public sector performance. |
| Since Inception (2014) | ~10% (CAGR) | Long-term growth from government-backed enterprises. |
Dividend Yield:
| Time Period | Dividend Yield | Notes |
| Annual Yield | 3% – 6% | Based on the dividend distribution by underlying companies. |
Explanation:
- 1-Year Returns: Recent performance, which can be impacted by market conditions, government disinvestment plans, and sectoral performance.
- 3-Year and 5-Year Returns: More stable performance, reflecting the overall trend in public sector stocks and the government’s disinvestment strategy.
- Since Inception Returns: Over the long term, the CPSE ETF has shown consistent returns, tracking the CPSE Index.
- Dividend Yield: Reflects dividends paid out by major public sector companies in the ETF’s portfolio, such as ONGC, IOC, Coal India, etc.
The returns are subject to market fluctuations and government policies, and the above values are approximations based on available data. Past performance is not indicative of future results.
CPSE ETF Dividend
The CPSE ETF (Central Public Sector Enterprises Exchange Traded Fund) offers dividends to its investors, primarily because the underlying companies in the ETF portfolio are public sector enterprises (PSUs), many of which have a history of paying regular dividends. These PSUs, such as ONGC, IOC, Coal India, NTPC, and others, are known for their stable dividend payouts.
Key Points About CPSE ETF Dividends:
(1) Dividend Yield:
- The CPSE ETF typically offers a dividend yield in the range of 3% to 6% annually, depending on the performance of the underlying companies and the dividends declared by them. This yield is relatively attractive compared to other equity ETFs, especially considering that many of the underlying PSUs are stable, large-cap companies.
(2) Dividend Distribution:
- The ETF pays out dividends to its investors periodically, which can be either annually or semi-annually. The specific dividend payout schedule can vary depending on the performance and dividend policies of the companies in the ETF’s portfolio.
(3) Dividend Payment History:
- The CPSE ETF has a consistent dividend payout record, as the majority of the underlying companies, especially those in the oil & gas, power, and mining sectors, generate steady profits and distribute those profits as dividends.
- For example, companies like ONGC, IOC, and NTPC have historically paid high dividends, which directly impact the CPSE ETF’s dividend payouts.
(4) Taxation on Dividends:
- Dividends from the CPSE ETF are subject to taxation based on the prevailing tax laws in India. For individuals, the dividend income is taxable at the individual’s income tax rate.
- If the ETF distributes dividends, it is taxed at a rate of 10% for domestic investors in case the dividend amount exceeds ₹5,000 in a financial year.
(5) Reinvestment Option:
- Some investors may choose to reinvest the dividends they receive into the CPSE ETF, thereby benefiting from compounding returns. However, the reinvestment option depends on the specific platform or brokerage providing the ETF.
Example of Dividend Yield:
For instance, if an investor holds ₹100,000 worth of CPSE ETF, and the ETF offers a dividend yield of 5%, the investor would receive ₹5,000 annually in dividends. This can be either in cash or reinvested based on the investor’s preference.
Conclusion:
The CPSE ETF offers a consistent dividend income to investors, making it an attractive choice for those looking for both capital appreciation and regular income. The dividends depend on the performance of the underlying PSUs, and with its strong history of dividend payouts, it’s a good option for income-seeking investors who prefer exposure to government-backed public sector companies.
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