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CCEA approved Exchange Trade Fund for PSU stocks

May 3, 2013 18:31 IST

The Cabinet Committee on Economic Affairs (CCEA) on 2 May 2013 cleared the government proposal to set up an exchange traded fund backed by a basket of PSU stocks, commonly referred as CPSEETF.

The basic idea behind setting up of fund is that among other benefits, PSU divestments could be carried out in a much less disturbing manner for the market and can also incentivize retail investors. An empowered group of ministers would take this forward.

The government plans to float such a fund so that, The CPSEETF will comprise a basket of shares of different PSUs which would track an index, but will trade like a stock on the exchange. ICICI Securities is the adviser to the ETF and Goldman Sachs is learnt to be the fund manager.

The release on CPSEETF noted that each stock would have a fixed weightage in the basket and the ETF will give discount to investors. It is important here to note that the Selling a mutual fund at a discount to its NAV is a new concept in the Indian market, and would require some rule change by the market regulator SEBI.

Is this article important for exams ? Yes14 People Agreed

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