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The department of disinvestment is likely to finalise the composition of the companies which will be part of PSU ETF basket by end of June.
The Cabinet has earlier this month cleared setting up of a PSU Exchange Traded Fund (ETF) which would, among other things, help in tackling post stake sale volatility in share prices.
“The DoD will decide on the final composition of the PSU ETF in consultation with the asset management companies by next month,” official sources said.
The empowered Group of Ministers (EGoM) on disinvestment will then take a final call on the composition and structure of the basket, they said, adding that the meeting is likely only by end June.
Elaborating on the probable composition of the basket, sources said it would be on the basis of either market capitalisation of the company or the free float.
“It is work in progress for PSU ETF. The DoD will present before the EGoM various options for arriving at the composition that could be based on either market cap or float,” sources said.
The government has selected Goldman Sachs Asset Management Company for managing the ETF.
The launch of PSU ETF will help fulfil the domestic investors’ appetite for equity ETF products as they are vastly under-served vis-a-vis the foreign investor community.
The ETF is also expected to deepen the equity market and will be beneficial to government from a pricing perspective.
The government is planning is raise Rs 40,000 crore through disinvestment in the current fiscal and has lined up a host of companies, including Indian Oil, Engineers India, Coal India and Hindustan Aeronautics for divesting minority stake.
In the last fiscal (2012-13), the government has raised Rs 23,920 crore through disinvestment.
ETFs were introduced in India in 2001. Currently, there are 33 ETFs having assets under management of close to Rs 11,500 crore and held by 6.2 lakh investors. Gold ETFs dominate ETF market in India.
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