Government is launching a Further Fund Offer (FFO) of CPSE ETF to raise Rs 6000 Cr. FFO is open from Jan 18 to Jan 20.

First things first, what is an ETF?

ETFs are exchange-traded funds that just invest in the same proportion as the index they track. Each ETF tracks a particular index – equity, debt or gold indices. They are popular among passive investors who do not have time or interest to trade in stocks directly but want to participate in the markets. ETFs closely match the returns of securities represented in the Indices. Another important point is that ETFs trade on exchanges so you can buy or sell them like any other stock.

CPSE ETF tracks Nifty CPSE Index. CPSE stands for Central Public Sector Enterprises.

What is Nifty CPSE index?

CPSE Index constitutes of 10 PSU companies. Here is the list of companies from NSE website.

cpse-index

What is FFO?

Further Fund Offer (FFO) is just like New Fund Offer except that this ETF already exists and it is called FFO. The ETF was launched in April 2014. This is follow on offer for the same ETF. Government is planning to sell Rs 6000 Cr worth of stake in this offer.

When can I apply for CPSE ETF FFO?

(too many jargons, isnt it)

Offer is open from Jan 18 to Jan 20. After some time the ETF will be listed on the stocks exchange and you can trade (buy or sell) on the stock exchange just like you do for any stock.

5% Discount for Retail Investors

Everybody likes discount 🙂 Retail Investors get 5% discount in this FFO. Government wants to increase retail participation. The discount if applicable only for application of less than Rs 2Lac.

Should I Invest?

Depends. I can provide you pros and cons.

Pros:

  • CPSE Index has performed good since its launch (around 14% annualized)
  • 5% Discount 🙂
  • Tax Saving under section 80CCG
  • No entry or exit load

Risk Factors:

  • High exposure to Oil and Gas
  • All PSU companies