CPSE ETF FFO 2 – An Energizing Offer – BUY

  • FFO Applications: 15-17th Mar; Listing by 7th Apr 
  • ETF has 10 PSUs; Oil and Gas heavy
  • Raising amount: Rs. 2,500 cr. 
  • Managed by Reliance Nippon Life Asset Management
  • Central PSEs, Exchange Traded Fund, Further Fund Offer 2
  • Buy with a 1 year perspective

Overview: The Scheme is a further follow on issue (FFO 2) after the January 2017 offer which was successful. CPSE ETF facilitates GoI’s initiative to disinvest stake in CPSEs through the ETF route. Past performance of CPSE ETF 2014 has been good with 19.2% CAGR over 3 years. A discount of 3.5% on the “FFO Reference Market Price” of the Nifty CPSE Index shall be offered in this Scheme. There are high sectoral risks in Oil and Gas sector with a commodities play. Also typically the asset rich PSUs are slow moving firms with a poor, lethargic culture. However overall the offer is attractive and rated a BUY with a 1 year perspective.

Advice: This is a medium risk, medium return offering suitable for conservative investors. Buy with a 1 year perspective.

Here is a note on the CPSE ETF FFO 2 offer 2017.

Offer Differences

  • This is a smaller offer, of Rs 2,500 crores compared to Rs 6,000 crores FFO earlier in Jan 2017
  • Very similar product, with CPSE ETF as benchmark
  • The retail discount on offer is 3.5% this time compared to 5% in the first FFO in Jan 2017
  • There is a small change in the allocation to the 10 companies of the Index, with PSU firms having more central govt. holdings getting a few % higher allocations.

Description

  • The Scheme is an open-ended index scheme, listed on the Exchanges in the form of an ETF. The investment objective is to provide returns like the Nifty CPSE Index.
  • In this offer 70% is reserved for Retail and QIB, while max 30% is for Anchor investors.
  • The CPSE ETF 2017 has been created to help in GoI disinvestment of PSUs. The Further Fund Offer (FFO) launched in Jan 2017 received good response; collections were Rs.13,742 cr., out of which Rs.7,742 cr. was refunded to investors due to limited issue size of Rs.6,000 cr.
  • The ten PSUs’ included in the ETF are known high dividend, low capital gains, asset rich firms.
  • FFO Price: The FFO Units being offered will have a face value of Rs. 10/- each and a premium equivalent to the difference between FFO Allotment Price and the FV . The FFO Allotment Price would be equal to 1/100th of Nifty CPSE Index less discount.
  • Discount: A discount of 3.5 % on the FFO Reference Market Price of the underlying shares of Nifty CPSE Index shall be offered to FFO of the Scheme by GOI. A discount of 5% was offered to retail investors in the first FFO in Jan 2017 which has been reduced to 3.5% this time.
  • The scheme is being managed by Reliance Nippon Life Asset Management Ltd.

Investment Details of the Scheme

  • Amount to be raised: Rs. 2,500 cr. The Scheme will invest at least 95% of assets in stocks of the Nifty CPSE Index. It may invest in Money Market Instruments upto a max of 5% of assets which could include T-Bills, commercial paper of public private sector corporate entities, etc.
  • The AMC will use a passive or indexing approach to try and achieve Scheme’s investment objective. Unlike other Funds, the Scheme does not try to beat the markets they track and do not seek temporary defensive positions when markets decline or appear overvalued.
  • Sectoral asset Allocation and historic returns:

jainmatrix investments, CPSE ETF

Table 1 – Sector allocation           Table 2 – CPSE ETF 2014 returns including Dividend

Source: Reliance Mutual Fund FFO 2 document

Analysis of the ten PSUs as part of this ETF:

jainmatrix Investments, cpse ETF

Table 3 – CPSE ETF FFO PSUs analysis

  • Note 1: The Engineers India report by JainMatrix Investments is available on LINK
  • Note 2: The Bharat Electronics report by JainMatrix is available at LINK
  • Note 3: When we say price is high, it is relative to 5 year historical prices. We have not done valuation exercises on these firms.
  • Portfolio Turnover: It is expected that there would be a number of Subscriptions and Redemptions on a daily basis. Portfolio Turnover Ratio of the Scheme is 1.02 as on Feb 28, 2017.
  • Dividend: The income received by way of Dividend shall be used for recurring expenses and redemption requirements or shall be accumulated and invested as per the investment objective of the Scheme. The Trustees may declare Dividend to the Unit holders under the Scheme subject to the availability of surplus, and at the discretion of the Trustees. If the Fund declares Dividend, the NAV of the Scheme will stand reduced by that amount.
  • Listing: The units of the Scheme will be listed on NSE and BSE by maximum April 7, 2017.
  • RGESS Eligibility: Investments made by a Retail Individual Investor in the RGESS Scheme will qualify for a 50% deduction of the actual amount invested from the taxable income of the financial year.

The ETF structure is explained below.

JainMatrix Investments, CPSE ETF

Table 4 – Nature of ETFs             Source: Reliance Mutual Fund FFO 2 document

Past Performance since launch in March 2014

jainmatrix investments, cpse

Table 5 – Performance of CPSE ETF since 2014 (as on 13th Mar 2017)

The CPSE ETF 2014 was listed in April 2014, and has been able to give original NFO retail investors an absolute 69.4% returns over 36 months. This includes a 1 year bonus for Retail, which is not available in CPSE ETF 2017. The CAGR returns are 19.2%, higher than those in Table 2 published in FFO. See reports:

  • JM Investments Mar 2014 report – CPSE ETF 2014 – New Fund Offer report
  • JM Investments Sept 2015 performance review – Review Sept 2015 of CPSE ETF 2014
  • We had published a report on the FFO (Further Fund Offer) of CPSE ETF on 14th Jan, 2017. And recommended a BUY with a 1 year perspective. You can have a look at the report on the following LINK and the video on this LINK.
  • Subscription response: The Reliance Mutual Fund managed CPSE ETF opened for applications from 17-20th It was subscribed by 2.30 times, with bids worth Rs13,802 cr. coming in against the issue size of Rs 6,000 cr. The FFO received 250,000 applications, with good demand across investor segments.
  • FFO Price: The FFO Allotment Price is approximately equal to 1/100th of Nifty CPSE Index minus discount. The allotment price was Rs 25.21 and this tranche was listed on 31st
  • Performance: The EOD closing price on the exchange was Rs. 27.71 today, i.e. 13thMar, 2017. This translates into a gain of 9.9% in 1.5 months.

PROS

  • This ETF has a lower management charge as this automatic. The expense ratio is 0.065% annualized.
  • The fund will offer 3.5% discount to the FFO 2 subscribers.
  • The 5 year share returns are 7.47% CAGR, see Table 3. This is fair but below Sensex of 10.63%.
  • The dividend yield for these stocks is 5.18% today which is good, Table 3.
  • The average beta of these stocks is 1.15 indicating higher volatility than indices.
  • Many of these firms own wonderful assets, the family silver of the GoI. Some of these firms also enjoy monopoly status in their sectors. See our opinions in Table 3.
  • GoI is asking for higher dividends from PSUs and allowing operational freedom to exploit assets and be more productive. This will benefits investors also. See report, A Repurpose for our PSUs
  • The crude oil price fall from USD 100+ levels to sub 50 per barrel is complete. While it is volatile, crude in next 1 year should be in USD 40-60 range. If it does, the Oil & Gas sector can perform well.
  • This fund is Oil and Gas heavy with 57% weightage. However it does have a mix of upstream, mid and downstream O&G firms, which together can de-risk the portfolio against commodity volatility.

CONS

  • This third fund raising is an opportunistic attempt by GoI to raise funds in FY17 based on the good market conditions and the success of the Jan 2017 offer. However every successive offer dilutes incremental gains and novelty of the offer. This dilution is being run in parallel with stock level dilution efforts like the Offer for Sale (OFS) with Bharat Electronics and Engineers India.
  • There is no strategic clarity on GoI shareholding in these firms – will they be fully divested, or a strategic sale, or as JVs, or retained with GoI majority holding in the long run.
  • While the expense ratio of the ETF is low, the high dividend paid by the PSUs is not being passed on to the unit holders, but used for recurring expenses, as per FFO document. The CPSE ETF 2014 too has not paid dividend for 3 years. The 5.18% dividend yield involves substantial monies. It’s not clear if dividends have contributed to the NAV of the CPSE ETF 2014.
  • This fund is O&G heavy with 57% weightage. If one extends the description to Energy/Coal/ Power/ Oil & Gas and related financing, it increases to 90%. These sectors are essential to the economy, but are typically operationally constrained and not shareholder friendly. They are dependent upon global prices, and so even well managed firms can swing to losses with a fall in commodity prices.
  • In Oil & Gas sector, the upstream Oil Exploration firms have been hit by falling crude oil prices. The CPSE ETF is upstream Oil & Gas heavy with ONGC having 25% weightage.
  • Even though Gail India has a monopoly, it has been hit in pipeline construction by interstate politics, farmer /social pressures and weak infra execution environment.
  • PFC and REC are executors of GoI programs in power sector. Their returns are sometimes guaranteed by GoI but when the entire sector gets stressed, they can suffer poor performance.
  • These stocks performance depends on revenue growth, which has been inconsistent in recent years.
  • Many of these firms depend on GoI policies and monopoly situations to grow. Some are externally constrained by weak infrastructure that hampers distribution (Railways for coal, pipelines for gas).
  • This CPSE ETF 2017 offering is managed by Reliance Mutual Fund.

Overall Opinion

  • The current govt. is focusing on good execution and better administration with a series of reforms. The environment is more result oriented with less political interference in PSUs.
  • The outlook for Oil & gas sector is stable this year. Domestic demand is high.
  • Past performance of CPSE ETF 2014 has been good with 19.2% CAGR over 3 years.
  • There are high sectoral risks with an Oil & Gas heavy commodities play. Also typically the asset rich PSUs are slow moving firms with a poor, lethargic culture.
  • However overall the offer is attractive and rated a BUY with a 1 year perspective.
  • This is a medium risk, medium return offering suitable for conservative investors.

JAINMATRIX KNOWLEDGE BASE

See other useful reports:

  1. Investment Notes – Euphoria
  2. Avenue Supermarts IPO: The Mart of Choice 
  3. Bharat Electronics OFS
  4. Whats different about the Investment Service from JainMatrix? – A video
  5. Why are Indian stock markets attractive for Investments? – A video
  6. BSE IPO: Put this Exchange on Hold – Report plus Video
  7. CPSE ETF FFO – An Energizing Offer – Report plus Video
  8. Balmer Lawrie – An Update
  9. Why Stocks, and Investment Outlook – Dec 2016 – A Video
  10. Investment Outlook – Short Term Pain, Medium Term Gain
  11. The Natural Quotient: A Sustainability Metric for Business
  12. PNB Housing Finance IPO: A Transformed Lender
  13. GNA Axels IPO
  14. RBL Bank IPO 
  15. New Banks: Big Changes in Small Change 
  16. Equitas IPO – Leader in SF Banks
  17. Do you want to be a value investor?
  18. Mahanagar Gas IPO 
  19. A Repurpose for our PSUs
  20. How to Approach the Stock Market – A Lesson from Warren Buffet
  21. Announcement – SEBI approval as a Research Analyst

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  • Visit the Investment Service page to find how you can get more. Or Click LINK
  • Register Now to get our Free reports and much more, on the top right of this page, or by filling this Signup Form CLICK.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Punit Jain holds CPSE ETF units since NFO in 2014. Other than this JM has no known financial interests in CPSE ETF / Reliance Mutual Fund or any related firm. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain is a registered Research Analyst and compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com .

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Why are Indian stock markets attractive for Investments?

In this 5 minute video, JainMatrix Investments founder Punit Jain presents a few reasons for investing in Indian stock markets. This is part of the Investor Education section of http://www.jainmatrix.com.

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DISCLAIMERS

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain is a registered Research Analyst and compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.

CPSE ETF FFO – An Energizing Offer – Post Listing Note

Date: 3rd Feb 2017 

Hi investors,

Introduction: We had published a report on the FFO (Further Fund Offer) of CPSE ETF on 14th Jan, 2017. And recommended a BUY with a 1 year perspective. You can have a look at the report on the following LINK and the video on this LINK.

Here is an update about the offer and about the performance of the CPSE ETF FFO.

  • Subscription response: The Reliance Mutual Fund managed CPSE ETF opened for applications from 17-20th It was subscribed by 2.30 times, with bids worth Rs13,802 cr. coming in against the issue size of Rs 6,000 cr. The FFO received 250,000 applications, with good demand across investor segments.
  • Allotment: Retail investors were favoured in this offer. It seems that full allotment has been made to all retail applicant applying up to Rs. 2 lakh worth of this Fund. Investors may also get a rounding off amount credited as refund.
  • Discount: A discount of 5 % on the FFO Reference Market Price of Index was offered to retail.
  • FFO Price: The FFO Allotment Price is approximately equal to 1/100thof Nifty CPSE Index minus discount. The allotment price was Rs 25.21 and this tranche was listed on 31st  Jan.
  • Performance: The EOD closing price on the exchange was Rs. 27.88 today, ie. 3rd Feb, 2017. This translates into a gain of 10.6% in 14 days.
  • Advice: (We stay with our recommendations) that this is a medium risk, medium return offering suitable for conservative investors. Buy with a 1 year perspective.
  • News: Based on the success of this second tranche of CPSE ETF, the Union Budget for FY 2017-18 announced that the government will continue to divest stake in state-owned companies in FY18 in the form of variations of CPSE ETF.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Punit Jain has an ownership in CPSE ETF 2014 units and CPSE ETF 2017 as a Retail applicant in NFO/ FFO only. Other than this JM has no known financial interests in CPSE ETF / Reliance Mutual Fund or any related firm. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain is a registered Research Analyst and compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com .

CPSE ETF FFO – An Energizing Offer – A Video

Hi Investors,

We present here a short video on the CPSE ETF FFO offer.

To read a detailed report, see CPSE ETF FFO – An Energizing Offer 

Happy investing,

Punit Jain

JAINMATRIX KNOWLEDGE BASE 

See other useful reports:

  1. Balmer Lawrie – An Update
  2. Why Stocks, and Investment Outlook – Dec 2016
  3. Investment Outlook – Short Term Pain, Medium Term Gain
  4. The Natural Quotient: A Sustainability Metric for Business
  5. PNB Housing Finance IPO: A Transformed Lender
  6. Endurance Technologies IPO 
  7. ICICI Prudential Insurance IPO – An Expensive BUY
  8. GNA Axels IPO
  9. RBL Bank IPO 
  10. New Banks: Big Changes in Small Change 
  11. Equitas IPO – Leader in SF Banks
  12. Do you want to be a value investor?
  13. Mahanagar Gas IPO 
  14. A Repurpose for our PSUs
  15. How to Approach the Stock Market – A Lesson from Warren Buffet
  16. Announcement – SEBI approval as a Research Analyst

DO YOU FIND THIS SITE USEFUL?

  • Visit the Investment Service offering page to find how you can get more.
  • Register Now to get our Free reports and much more, on the top right of this page, or by filling this Signup Form CLICK.

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Punit Jain discloses an ownership in CPSE ETF 2014 units as a Retail application in NFO only. Other than this JM has no known financial interests in CPSE ETF / Reliance Mutual Fund or any related firm. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain is a registered Research Analyst and compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com .

CPSE ETF FFO – An Energizing Offer

  • Date: 14th Jan 2017
  • FFO Application: 18-20th Jan and Listing by 10th Feb, 2017
  • Amount to be raised: maximum of Rs. 6,000 cr.
  • Managed by Reliance Nippon Life Asset Management
  • Central PSEs, Exchange Traded Fund, Further Fund Offer
  • Buy with a 1 year perspective.

Overview: The Scheme is a follow on issue after the 2014 offer which was quite successful. CPSE ETF facilitates GoI’s initiative to disinvest stake in CPSEs through the ETF route. Past performance of CPSE ETF 2014 has been good with 19.8% CAGR over 33 months. A discount of 5% on the “FFO Reference Market Price” of the underlying shares of Nifty CPSE Index shall be offered to FFO of the Scheme. There are high sectoral risks in Oil and Gas sector with a commodities play. Also typically the asset rich PSUs are slow moving firms with a poor, lethargic culture. However overall the offer is attractive and rated a BUY with a 1 year perspective.

Advice: This is a medium risk, medium return offering suitable for conservative investors. Buy with a 1 year perspective.

Here is a note on the CPSE ETF Offer 2017.

Offer Description

  • The Scheme is an open-ended index scheme, listed on the Exchanges in the form of an Exchange Traded Fund (ETF). The investment objective of the Scheme is to provide returns that closely correspond to the returns of the Nifty CPSE Index, by investing in the constituents of the Index in the same proportion as in the index.
  • The CPSE ETF 2017 is an instrument created to help the GoI in the disinvestment of PSUs. Post listing, there is a facility that further disinvestment can also be done through this vehicle.
  • Ten leading PSUs’ will be included in this ETF. Typically these are fairly well known high dividend, low capital gains but asset rich companies.
  • FFO Price: The FFO Units being offered will have a face value of Rs. 10/- each and will be issued at a premium equivalent to the difference between FFO Allotment Price and the face value of Rs. 10/- each. The FFO Allotment Price would be approximately equal to 1/100th of Nifty CPSE Index and would be calculated considering discount offered by GOI pursuant to FFO of the Scheme for buying underlying Nifty CPSE Index shares out of the FFO Proceeds.
  • Discount: A discount of 5 % on the FFO Reference Market Price of the underlying shares of Nifty CPSE Index shall be offered to FFO of the Scheme by GOI.
  • Retail gets at least 70% quota of entire Offer. Anchor investors + QIB + NII will get the remaining available 30% quota of offer.
  • The scheme is being managed by Reliance Nippon Life Asset Management Limited (RNLAM)

Investment Details of the Scheme

  • The Scheme will invest at least 95% of its total assets in the stocks of the Nifty CPSE Index.
  • The Scheme may invest in Money Market Instruments upto a max of 5% of its assets which could include T-Bills, commercial paper of public private sector corporate entities, etc.
  • Amount to be raised: Rs. 6,000 cr. includes Initial Amount of Rs. 4,500 cr. and Addl. Rs. 1,500 cr.
  • The AMC will use a passive or indexing approach to try and achieve Scheme’s investment objective. Unlike other Funds, the Scheme does not try to beat the markets they track and do not seek temporary defensive positions when markets decline or appear overvalued.
  • Sectoral asset Allocation and historic returns – Source: Reliance MF FFO document
JainMatrix Investments, CPSE ETF

Table 1 – Sector allocation/ Table 2 – CPSE ETF 2014 returns inc. Dividend

  • Portfolio Turnover: With Subscriptions and Redemptions on a daily basis and tracking error, Portfolio Turnover Ratio is expected to be 0.15 as on Dec 31, 2016.
  • Dividend: The income received by way of Dividend shall be used for recurring expenses and redemption requirements or shall be accumulated and invested as per the investment objective of the Scheme. The Trustees may declare Dividend to the Unit holders under the Scheme subject to the availability of surplus, and at the discretion of the Trustees. If the Fund declares Dividend, the NAV of the Scheme will stand reduced by that amount.
  • Listing: The units of the Scheme will be listed on NSE and BSE by maximum Feb 10, 2017.
  • RGESS Eligibility: Investments made by a Retail Investors in the RGESS Scheme will qualify for a 50% deduction of the amount invested from the taxable income of the financial year.
  • Analysis of the ten PSUs as part of this ETF
JainMatrix Investments, CPSE ETF

Table 3 – CPSE ETF FFO PSUs analysis

  • Note 1: The Engineers India Ltd recent report by JainMatrix Investments is available on LINK
  • Note 2: When we say price is high, it is relative to 5 year historical prices. We have not done valuation exercises on these firms.

The ETF structure is explained below.

JainMatrix Investments, CPSE ETF

Table 4 – Nature of ETFs;  Source: Reliance Mutual Fund FFO document

Past Performance

The CPSE ETF 2014 was listed in April 2014, and has been able to give original NFO investors an absolute 64.24% returns over 33 months. This includes a 1 year bonus for Retail, which is not available in CPSE ETF 2017. The returns for Retail are 19.77% CAGR, higher than those in Table 2 published in FFO. Also see reports made by JainMatrix:

JainMatrix Investments, CPSE ETF

Table 5 – Past Performance of CPSE ETF 2014

PROS

  • This ETF offering has a lower management charge as stock selection and portfolio changes are automatic. The expense ratio is just 0.065% annualized.
  • The fund will offer 5% discount to the FFO subscribers.
  • The 5 year share returns are 8.05% CAGR, see Table 4. This is fair but below Sensex of 10.59%.
  • The dividend yield for these stocks is 5.24% today which is good, Table 4.
  • The average beta of these stocks is 1.16 indicating higher volatility than indices.
  • Many of these firms own wonderful assets, the family silver of the GoI. Some of these firms also enjoy monopoly status in their sectors. See our opinions in Table 4.
  • GoI is asking for higher dividends from PSUs and also allowing operational freedom to exploit assets and be more productive. This is positive. See report, A Repurpose for our PSUs
  • The crude oil price fell last year from USD 100+ levels to sub 50 per barrel. The fall looks complete for now. While prices are volatile, crude in next 1 year should be in USD 40-60 range. If it does, the Oil & Gas (O&G) sector overall can perform well.
  • This fund is O&G heavy with 57% weightage. However it does have a mix of upstream, mid and downstream O&G firms, which together can derisk the portfolio against commodity volatility.
  •  Employees’ Provident Fund Organisation decides to invest Rs2,800 crore in CPSE ETF. This surely meas that the institutional quots will be over subscribed.

CONS

  • While the expense ratio of the ETF is low, the high dividend paid by the PSUs may not be passed on to the unit holders, but used for recurring expenses, as per FFO document. The CPSE ETF 2014 too has not paid dividend for 2.5 years. The 5.4% dividend yield this year involve substantial monies. It’s not clear if dividends have contributed to the NAV of the CPSE ETF 2014.
  • This fund is O&G heavy with 57% weightage. If one extends the description to Energy/Coal/ Power/ O&G and related financing, it increases to 90%. These sectors are essential to the economy, but are typically operationally constrained and not shareholder friendly. They are dependent upon global prices, and so even well managed firms can swing to losses with a fall in commodity prices. In O&G sector, the upstream Oil Exploration firms have been hit by falling crude oil prices.
  • Even though Gail India has a monopoly, it has been hit in pipeline construction by interstate politics, farmer /social pressures and weak infra execution environment.
  • These stocks performance depends on revenue growth, which has been inconsistent in recent years.
  • Many of these firms depend on GoI policies and monopoly situations to grow. Some are externally constrained by weak infrastructure that hampers distribution (Railways for coal, pipelines for gas).
  • PFC and REC are executors of GoI programs in power sector. Their returns are sometimes guaranteed by GoI but when the entire sector gets stressed, they can suffer poor performance.
  • This CPSE ETF 2017 offering is managed by Reliance Mutual Fund.

Overall Opinion

  • The current govt. is focusing on good execution and better administration with a series of reforms. The environment is more result oriented with less political interference in PSUs.
  • The outlook for Oil & Gas sector is stable this year. Domestic demand is high.
  • Past performance of CPSE ETF 2014 has been good with 19.8% CAGR over 33 months.
  • Retail gets at least 70% of CPSE ETF offer, so it is skewed in their favour.
  • There are high sectoral risks with a commodities play. Also typically the asset rich legacy PSUs are slow moving firms with a poor, lethargic culture.
  • However overall the offer is attractive and rated a BUY with a 1 year perspective.
  • This is a medium risk, medium return offering suitable for conservative investors.

JAINMATRIX KNOWLEDGE BASE 

See other useful reports:

  1. Balmer Lawrie – An Update
  2. Why Stocks, and Investment Outlook – Dec 2016
  3. Investment Outlook – Short Term Pain, Medium Term Gain
  4. The Natural Quotient: A Sustainability Metric for Business
  5. PNB Housing Finance IPO: A Transformed Lender
  6. Endurance Technologies IPO 
  7. ICICI Prudential Insurance IPO – An Expensive BUY
  8. GNA Axels IPO
  9. RBL Bank IPO 
  10. New Banks: Big Changes in Small Change 
  11. Equitas IPO – Leader in SF Banks
  12. Do you want to be a value investor?
  13. Mahanagar Gas IPO 
  14. A Repurpose for our PSUs
  15. How to Approach the Stock Market – A Lesson from Warren Buffet
  16. Announcement – SEBI approval as a Research Analyst

DO YOU FIND THIS SITE USEFUL?

  • Visit the Investment Service offering page to find how you can get more.
  • Register Now to get our Free reports and much more, on the top right of this page, or by filling this Signup Form CLICK.

Disclaimer

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Punit Jain discloses an ownership in CPSE ETF 2014 units as a Retail application in NFO only. Other than this JM has no known financial interests in CPSE ETF / Reliance Mutual Fund or any related firm. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain is a registered Research Analyst and compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com .

JainMatrix Track Record Jan 5th 2017

Dear Investor,                                                                                                                       05th Jan 2017

JainMatrix Investments is a premium Investment Service for Indian equity. We build wealth with advise on direct equity purchases for the long term. Its the best way to get great returns, lower costs and yet be in control of your own portfolio.

We created two Model Portfolios nearly 4 years ago, with some good stock picks at the time. We have been monitored these companies, removing non performers and introducing new picks, to  give you two outstanding Model portfolios that are creating great wealth for subscribers.

Today we share and update on the Track Record for the JainMatrix Model Portfolios.

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Performance Tracker

See the compilation of performance of the Model portfolios from JainMatrix Investments.
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JainMatrix Investments

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Performance Description

The market has been volatile in the last 3 months. However, JainMatrix Investments continues to do well on its recommended model portfolios.
  • We have a portfolio universe of 50 stocks, the finest firms from our research over 3-4 years.
  • From this universe, we created 2 portfolios of 7 shares each – a Large Cap and a Mid & Small Cap portfolio

Mid and Small Cap Portfolio 

  • The JainMatrix Mid & Small Cap Multi-bagger Model Portfolio gave 28% annualized returns over 46 months, compared to CNX Midcap (20%), S&P BSE Midcap (19.8%) and S&P BSE Smallcap (19.8%) over same period. It outperformed by 8.0% simple annualized. On a CAGR basis the outperformance was 2.8%.
  • The best performing Mid or Small Cap mutual fund gave 33.4% returns in this period. We are in the top 5% (source Value Research) of 78+ funds.
  • Absolute performance levels have fallen, but our portfolios offer the best way to invest in the current scenario.

Large Cap Portfolio 

  • The JainMatrix Large Cap Retirement Model Portfolio gave 15.7% annualized returns over 47 months, compared to Sensex (9.4%) and Nifty (9.8%) over the same period. It outperformed by 5.9% simple annualized. On a CAGR basis the outperformance was 2.5%.
  • The best performing Large Cap Mutual Fund in this period gave 17.2% returns, out of 150+ funds. This portfolio is again in the top 5% of these mutual Funds. (source Value Research).

Other Valuable Research – IPOs, Stock Ideas, Sector and Trend reports

  • In addition to Model Portfolios, we also research New stock Ideas, IPO offerings and sectoral trends
  • Our IPO reports have a high success rate and have helped identify winners. Subscribers also receive valuable Listing Day – buying range advise on IPO picks, so that they can take large positions, as allotments may be limited to 1-2 lots.
  • Our sectoral and economy notes help develop long term thinking after events like demonetization and other events.

Sign up for the JainMatrix Investment Service to take the right decisions, whatever the event, in your investing journey. ..

Subscribe NOW to get the best Investment Service

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JAINMATRIX KNOWLEDGE BASE 

See other useful public reports:

  1. Why Stocks and Investment Outlook Dec 2016 – a Video
  2. Investment Outlook – Short Term Pain, Medium Term Gain
  3. The Natural Quotient: A Sustainability Metric for Business
  4. PNB Housing Finance IPO: A Transformed Lender
  5. Endurance Technologies IPO 
  6. ICICI Prudential Insurance IPO – An Expensive BUY
  7. GNA Axels IPO
  8. RBL Bank IPO 
  9. New Banks: Big Changes in Small Change 
  10. Equitas IPO – Leader in SF Banks
  11. Do you want to be a value investor?
  12. Mahanagar Gas IPO 
  13. How will Brexit impact Indian investors?
  14. A Repurpose for our PSUs
  15. How to Approach the Stock Market – A Lesson from Warren Buffet
  16. Thyrocare IPO – Wellness for your Wealth
  17. Announcement – SEBI approval as a Research Analyst
  18. Alkem Labs IPO
  19. Goods And Services Tax (GST): Integration And Efficiency
  20. Syngene IPO: Good Pharma R&D spinoff from Biocon

DO YOU FIND THIS SITE USEFUL?

  • Visit the Investment Service offering page to find how you can get more.
  • Register Now to get our Free reports and much more, on the top right of this page, or by filling this Signup Form CLICK.

DISCLAIMERS

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Punit Jain is a registered Research Analyst and compliant with SEBI (Research Analysts) Regulations, 2014. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com.