Divestment in top PSUs could make the ETF as big as Rs 30,000 crore.
Given that the ETF has given exceptional returns over the past year, start small and buy more in a staggered manner.
ETFs function like a mutual fund scheme and have underlying assets of government-owned companies.
In a bid to enhance its equity exposure and earn higher returns for its nearly 65 million subscribers, the Employees' Provident Fund Organisation (EPFO) is considering reinvesting 50 per cent of its exchange-traded funds (ETFs) redemption proceeds back into equity. Sources close to the development said a proposal regarding this was discussed in the investment committee (IC) meeting in October last year, and the recommendation has been sent to the Central Board of Trustees (CBT), the apex decision-making body of the EPFO for its approval. The next CBT meeting is scheduled to be held on Saturday.
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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).
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The ETF is expected to fetch the govt Rs 3,000 crore.
The RBI advisory follows a labour ministry request earlier this year seeking the central bank's expertise to identify gaps in EPFO's investment strategy and fund management practices, including accounting, risk management, and internal governance.
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.
These ETFs will also carry interest-rate risk, especially the 10-year ETF. The investor can overcome this risk by holding them till maturity, suggests Sanjay Kumar Singh.
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.
The previous highest divestment proceeds for the first half of a year was around Rs 21,000 crore in 2016-17.
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.
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.
In last few years, a number of global players have exited the Indian mutual fund business.
