A Unique Way of Wealth Creation Investing

Are you looking for ways to make your money work harder for you? It’s probably already clear to you that your savings account or fixed deposits cannot help in wealth creation. If you’re looking to diversify your portfolio or to increase your potential returns, an interesting option has just been launched.

The highly-reputed Reliance Group has launched the third Further Fund Offering (FFO) of the Exchange Traded Fund (ETF) of Central Public Sector Enterprises (CPSE). This FFO is the fourth offering of its kind and follows the raging success of the earlier offerings. What’s more is that you’re eligible for an upfront discount of 4.5% on the FFO3 reference market price to the underlying Nifty CPSE index shares.

Experts believe that wealth creation investing is all about the perfect timing and thorough due diligence. Let’s look at both these aspects.

Don’t Let Time Run Out

The FFO3 of CPSE ETF will not last long. So, now is the time to invest in this unique opportunity.

November 27, 2018 – FFO3 of the CPSE ETF opened and closed for anchor investors.

November 28 to November 30 – FFO3 of the CPSE ETF will be open for non-anchor investors for only three days.

Due Diligence

FFO3 of the CPSE ETF is part of the Government of India’s larger disinvestment program. It represents a compelling opportunity to:

  • Invest in the India growth story
  • Add distinguished PSUs to your portfolio
  • Participate in an offering that has been a resounding success
  • Achieve strategic portfolio diversification

Invest in the India Growth Story

The IMF forecasts India’s GDP growth at 7.3% for fiscal 2018 and expects this to accelerate to 7.5% in fiscal 2019. Against this backdrop, the stock market has already achieved elevated prices, while the prices of PSU stocks have remained subdued. On the other hand, public sector enterprises offer more attractive valuations.

The government is determined to propel India’s economic growth, and this will be done by increasing public investment. As the government makes larger and more frequent investments in PSUs and implements reforms, these public sector enterprises will become stronger and offer better dividends as well as appreciation in valuation.

Here’s a comparison, based on figures from NSE dated October 31, 2018:

Dividends: All participating companies in the CPSE ETF have been paying dividends for several years. The dividend yield for Nifty CPSE is 5.25%, while the dividend yield offered by Nifty 50 is 1.27%, by Nifty 100 is 1.24% and by Nifty 500 is 1.19%.

Valuations: While the P/E ratio for Nifty CPSE is 9.37, the P/E ratio for Nifty 50 is 25.00, for Nifty 100 is 26.20 and for Nifty 500 is 28.88. 

Add Distinguished PSUs to Your Portfolio

The CPSE ETF is based on the Nifty CPSE Index, which includes 11 listed CPSEs that have more than 53% government stake and average free float market capitalization of greater than ₹1,000 crores, as of August 2018. These CPSEs are the government’s 11 ratnas. These public sector enterprises are not required to seek government permission for making investments up to a certain limit. And, they include blue-chip entities that are cash rich or financially comfortable.

By investing in FFO3 of the CPSE ETF, you can gain exposure to public sector entities that are industry leaders, like ONGC, NLC India Ltd, Coal India Ltd, Bharat Electronics Ltd, Oil India Ltd, NTPC Ltd and Power Finance Corporation Ltd.

An Offering That’s Part of a Raging Success Story

The NFO (new funding offer) held in March 2014 attracted 37,322 investors, of which around 98% were individual investors. The NFO raised ₹4,363 crores, versus the issue size of ₹3,000 crores.

The first FFO, held in January 2017, attracted 2,70,770 investors and raised an astounding ₹13,795 crores. Here, the issue size was ₹6,000 crores.

The second FFO, held in March 2017, attracted 1,66,460 investors and raised ₹10,083 crores, compared to the issue size of ₹2,500 crores.

Given this overwhelming response to the earlier offerings, the third FFO is also expected to be a resounding success.

The current issue size for FFO 3 is at ₹6,000-₹12,000 crores.

Achieve Strategic Portfolio Diversification

The CPSE ETF offers a great opportunity for portfolio diversification, adding blue-chip stocks of public sector enterprises. Moreover, these entities are industry leaders and play a strategic role in India’s growth story.

The CPSE ETF is a relatively safer way of investing in growth stocks. This is because volatility in the price of one gets balanced by price stability of others in the index. So, even if you’re new to investing, you can choose the CPSE ETF and add strength to your portfolio.

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