Here’s a Chance to Make Your Money Work Harder for You

Published On November 23, 2018 | By Layne Grady | Finance

Make Your Money Work Harder for You

Have you been looking for avenues to earn an attractive rate of return on your investment? The interest rates that banks offer on savings account or fixed deposits are clearly not enough for wealth creation. In fact, they barely cover for the impact of inflation, which means that you end up losing money over a longer period of time, rather than earning something substantial. So, is there a way to increase the potential returns?

Did you know that you can invest in public sector enterprises? In fact, many are turning to investing in state-owned entities, given the elevated prices of private sector stocks.But how do you choose the best ones? Fret not, the homework has already been done. You can gain exposure to reputed public sector enterprises via an exchange traded fund.

The renowned Reliance Group has announced the launch of the third Further Fund Offering (FFO) of the Exchange Traded Fund (ETF) of Central Public Sector Enterprises (CPSE). This upcoming FFO represents the fourth of such an offering, following the stupendous success of the earlier offerings.

Mark This on Your Calendar

November 27, 2018 – This is the date on which FFO3 of the CPSE ETF will open and close for anchor investors.

November 28, 2018 – This is the date on which FFO3 of the CPSE ETF will open for non-anchor investors.

November 30, 2018 – On this date, FFO3 of the CPSE ETF will close for non-anchor investors.

Is This a Good Time to Invest in Public Sector Enterprises?

FFO3 of the CPSE ETF is part of the Government of India’s larger disinvestment program, which was announced by the Ministry of Finance.

The CPSE ETF not only offers investors a chance to diversify their portfolio with distinguished PSUs, but alsorepresents a compelling opportunity to invest in the India growth story.India is poised to record GDP growth of 7.3% in the current fiscal year, and this rate is expected to accelerate to 7.5% in 2019-2020, according to forecasts released by IMF.

India’s growth will be fueled by strengthening public investment, as the government aims to achieve and even surpass the forecast. As the government makes larger and larger investments in PSUs, they will become operationally stronger and their valuations will rise. So, this is a good time to gain exposure to PSUs by investing in FFO3 of the CPSE ETF.

A Chance to Invest in the 11 Ratnas of the GoI

To drive economic growth, the government will focus on its 11 ratnas. Based on their size and reach, these 11 ratnascomprise ofMaharatnas, Navratnas and Miniratnas. These public sector enterprises do not need to seek government permission for making investments up to a predefined limit. Most of these blue-chip public service enterprises are cash rich or financially comfortable.

FFO3 of the CPSE ETF is an opportunity to gain exposure to such entities, which need no introduction. These include behemoths such as ONGC, NLC India Ltd, Coal India Ltd, Bharat Electronics Ltd, Oil India Ltd, NTPC Ltd and Power Finance Corporation Ltd.

Some of the other benefits of investing in the CPSE ETF FFO3 are:

  • All participating companies have been paying dividends for several years. The dividend yield for Nifty CPSE is 5.25%, versus that of 1.27% for Nifty 50, 1.24% for Nifty 100 and 1.19% for Nifty 500, according to figures from NSE dated October 31, 2018.
  • The participating companies are industry leaders and play a strategic role in India’s growth story.
  • They have attractive valuations. The P/E ratio for Nifty CPSE is 9.37, versus that of 25.00 for Nifty 50, 26.20 for Nifty 100 and28.88 for Nifty 500.
  • Upfront discount of 4.5% on the FFO3 reference market price to the underlying Nifty CPSE index shares.
  • FFOs comprise lower transaction costs.

The CPSE ETF is a relatively safer route to invest in growth stocks, since fluctuations in the price of one is balanced by the price stability of others. So, even if you’re new to investing or stocks, you can invest in the CPSE ETF and add strength to your portfolio, even without in-depth knowledge of the functioning of financial markets.

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