ETFs function like a mutual fund scheme and have underlying assets of government-owned companies.
If one compares returns, the two public-sector ETFs have done better over the past year, but the ELSS category has done better over the trailing three and five years.
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The Finance Ministry has filed the offer document with market regulator Securities and Exchange Board of India for the Central Public Sector Enterprises ETF, which could fetch the exchequer about Rs 3,000 crore (Rs 30 billion).
Sources said many individual investors were interested in applying for the NFO, due to additional benefits being offered such as upfront discounts and loyalty bonuses.
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The ETF is expected to fetch the govt Rs 3,000 crore.
Unlike mutual funds, an ETF trades like a common stock.
Given that the ETF has given exceptional returns over the past year, start small and buy more in a staggered manner.
There is widening gap between what the government's premier retirement fund makes on its investments and what it offers to employees. The Employees' Provident Fund Organisation (EPFO) makes the bulk of its investments in government-related securities. In other words, it lends to central and state governments and related entities. The interest it gets from these instruments is largely what it uses to pay interest to its subscribers.
This is the second highest divestment proceeds in a financial year.
Institutional investors - both foreign and domestic - lapped up the government's big-ticket share sales on Friday, helping it add nearly Rs 9,000 crore to its revenue kitty.
The previous highest divestment proceeds for the first half of a year was around Rs 21,000 crore in 2016-17.
While divestment through IPOs saw an over 90 per cent drop as compared to the previous financial year, the exchange traded fund (ETF) route proved to be a shot in the arm for the government, reports Sundar Sethuraman.
The government on Wednesday said it will raise Rs 72,500 crore through disinvestment of PSUs, including listing of three railway PSUs IRCTC, IRFC and IRCON, and proposed merger and consolidation to create globally competitive public sector units.
Using buyback as a divestment tool is not new, the amount raised this year is phenomenally high.
In last few years, a number of global players have exited the Indian mutual fund business.
The divestment target remaining unchanged, from the 2019-20 interim Budget, this year means the Centre will now have to depend on non-tax revenue sources like dividends from the RBI, PSBs and PSUs, as there are real concerns of a tax revenue shortfall. The fiscal deficit target of 3.4% of GDP for 2019-20 is likely to be retained as well.
For first time in 8 yrs, stake sale proceeds could exceed Budget Estimates. ONGC's acquisition of HPCL alone could get the exchequer more than Rs 30,000 crore.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
While the April-February deficit is pegged at 5.3 per cent of GDP, the final print may be a tad lower due to revenue push and expenditure cuts seen in March, the last month of 2013-14 fiscal year, it said.
Going by the experience of the previous years -- when the actual proceeds from stake sale were much lower than the targets -- the government's disinvestment target for 2014-15 appears too ambitious.
A chunk of divestment till now has come from follow-on offerings in the Centre's two ETFs, Bharat-22 and CPSE. Now, there will be initial public offerings of Mazagon Docks, rail companies RVNL and IRFC and MSTC.
It is advisable to avoid a fund until it develops a track record.
In 5 years, the AMC has clocked a growth rate of 40% with its AUM up nearly 4 times.
The government currently holds 87.40 per cent stake in IRCTC. To meet Sebi's public holding norm, it has to lower its stake in the company to 75 per cent.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
Ajit Mishra, vice president, Research, Religare Broking, answers your queries.
The New Year 2015, however, may see shares worth over Rs 50,000 crore (Rs 500 billion) being put on the table by the government, including by way of part-sale of its holdings in PSUs and its residual minority stakes in some private sector entities.
Ajit Mishra, Vice President, Research, Religare Broking, answers readers's queries on stocks they own or want to buy.
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