Monday, March 17, 2014

Should You Invest in the Goldman Sachs PSU ETF Scheme?

Goldman Sachs, one of the worlds leading Investment Banks is coming up with a new ETF Scheme that aims at investing in the large Public Sector Undertakings or PSU’s in India. The scheme opens for anchor investors tomorrow and retail Investors on 19th March. The idea behind this article is to give you a brief overview of whether this ETF Scheme should be a part of your Investment Portfolio.

Before we Begin: As with all stock market related instruments – ETF’s too come with an inherent risk of Loss. There is a very real possibility that the PSU stocks that come under this scheme make losses and their stock price tanks. In such a case, you will end up making losses. So, if you are someone who is not so comfortable taking risks, I would suggest you stay away from this scheme…

The Basics of this Goldman Sachs PSU ETF Scheme

The Asset Management Company (Goldman) will collect the money via NFO from investors and pass it on to the government, and in return the government will pass on a basket of shares (of underlying 10 companies) to the MF scheme, at a discount of 5 percent. The AMC will create units which will represent the shares of the underlying companies. The price movement of the ETF Unit will replicate the price movement of the underlying 10 company shares.

What are the PSUs that come under this scheme?

The following are the PSU's that come under this scheme along with their respective Weightage in the scheme.

1. ONGC Ltd - 26.72%
2. Gail Ltd - 18.48%
3. Coal India Ltd - 17.75%
4. REC Ltd - 7.16%
5. Oil India Ltd - 7.04%
6. India Oil Corporation Ltd - 6.82%
7. Power Finance Corporation - 6.49%
8. Container Corporation of India Ltd - 6.40%
9. Bharat Electronics Ltd - 2% and
10. Engineers India Ltd - 1.13%

The NFO Scheme – Dates:

For Retail Investors like you and me, the scheme opens on 19th March and Closes on 21st March. For Anchor Investors (who can invest in crores) the scheme opens on 18th March.

Benefit of Investing in the New Fund Offer (NFO) Stage:

If you invest in this ETF scheme during the NFO stage, you will get one free unit for every 15 units you hold. To avail of the bonus the investors need to hold the units for 12 months from the allotment date. The bonus offer is applicable only if you have bought the units during the NFO. The scheme comes with a face value of Rs 10 per unit.

The Benchmark Index:

The benchmark index for the scheme is CPSE index, and pricing will be 1/100th of the CPSE index.

Minimum and Maximum Application Amounts – For Retail Investors:

The minimum application amount for retail individual investor is Rs 5,000, and in multiples of Rs 1 thereafter. As a retail investor you can invest a maximum of Rs 2 lakh in the scheme.

Type & Listing Info:

The ETF type is “growth” and will be listed on the National Stock Exchange and Bombay Stock Exchange.

Entry and Exit Loads:

Both loads are set at ‘0’

Does this scheme have Tax Benefits?

Yes, investment under this scheme gives you tax benefits under the Rajiv Gandhi Equity Savings Scheme (RGESS)

My Take On This Scheme:

When you invest in this scheme, you get exposure to large PSU companies in energy space. The fact that the Government is offering a 5% discount in price for NFO Investors makes this a good start for you to enter the blue-chip Investment space. On top of this, you are going to get 1 loyalty bonus unit for every 15 units that you buy during the NFO Period. So, if you purchase 1500 units during NFO Period, you will get 100 units for free at the end of 1 year.
On top of all this, you get tax benefits under the RGESS scheme which makes this an awesome opportunity to start investing in blue-chip stocks.

I Would Give a Big Thumbs Up to this scheme and recommend it to anyone who has the ability to take risks and invest in stocks from a long term perspective.

Please Note: This scheme would be advisable only from a long-term perspective – At least 3 years or more. In the short term, the fund may underperform if the markets are volatile but in the long run these PSUs are profitable and can give you good returns. If you are expecting a short-term bang for your buck, I would recommend that you STAY AWAY from this scheme…

Happy Investing!!!


  1. Hey Anand,

    Thanks for the article, is it possible to invest after 21st march ?


  2. Hi Anand, how can an nri invest in this scheme?

    1. This is a normal ETF that can be purchased from the stock market using your DEMAT Account. Do you have an NRI DEMAT Account from India? IF so, you can purchase through that. Else, you would have to open an account first


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