Sundeep Sikka, ED and CEO, Reliance Nippon Life Asset Management talks to Zee Business on CPSE ETF. Sikka said that CPSE ETF h ave generated good returns since inception and initial response to the current ETF has been good. 

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Excerpts:

Q. Do you think the 5% discount offered to investors will attract them to invest in the CPSE ETF?

A:The CPSE ETF since inception generated returns of around 15% as compared to 8% generated by the benchmark Nifty 50. In the last one year, Nifty 50 generated returns of 5% as compared to CPSE ETF which generated returns of 17%. The companies in the basket consists of the Maharatna and Navratna companies of the Grovernment of India. In terms of valuation and dividend yield is better when compared to Nifty 50 index. On all the parameters, we feel that the track record of the CPSE ETF is now established and the 5% discount coupled with assured allocation to retail makes it an attractive proposition for investors to park their funds in the CPSE ETF.

We have held many road shows in tier 1 and tier 2 cities across India and we have got good response for the same. What we feel is that if you are betting on India, the sectors covered by the companies in the CPSE ETF have to do well going forward. The initial response have been good and the we expect the same going forward also.

Q: You mentioned assured allocation to retail, so is there any portion allocated for the retail investors?

A: If we see earlier, if the issue is oversubscribed, then the allocation was on a proportionate basis across all categories except the anchor investors. But this time, retail investors will be given first preference, followed by long term pension funds and provident funds. After these the allocation will be made to other categories of investors. In this issue, 70% of the issue is allocated to retail investors.

Q: If we look at the basket, higher weightages have been given to energy stocks. Will this remain the same in this tranche also?

A: The weightages will remain the same. If you look at the basket, the sectors covered includes energy, minerals, construction and financial services. But you are right the weightage is inclined towards the energy sector. If you look at the energy stocks, they are all blue-chip stocks and the returns generated by the basket in the last 3 years have been very good. We expect the prospects of the stocks to be better in the coming period also.

Q:Do you feel that this is an opportune time to come out with the FFO of CPSE ETF, keeping in mind the post demonetisation phase and the volatile nature of the markets?

A: I am not the right person to comment on the timing, as this is a decision taken by the government. But what I can say to retail investors is that you should invest with a three year perspective and we feel that the India’s growth story is intact and if you believe that PM Narendra Modi will take the coutry forward, of which we are a strong believer. We are confident that any investors investing with a three year perspective in equities will generate better returns. This is because the basket in the CPSE ETF trades at good valuations. The other difference is that in the last time, the cost is 49 basis points but now the cost is six and half basis points, the differential for the same will be added to the investors return.

Q: Keeping in mind the budget is round the corner, the buying in the markets have increased in an anticipation of market friendly budget. What are your expectations from the budget and which sectors are likely to remain in focus during the budget?

It will be difficult to speak about budget at this point of time. But what we feel that the companies and the sector in the basket will do well.