The Finance Ministry has initiated the process of setting up an Exchange Traded Fund (ETF) of 20 profit-making PSUs and will soon float a Cabinet note to seek opinion of other ministries.

“Finance Ministry is likely to float a Cabinet note on setting up of ETF of Central Public Sector Enterprises (ETF-CPSEs) soon. It will be sent for inter-ministerial consultation and within the next two weeks it would come up before Cabinet for approval,” an official said.

The proposed ETF, which would be based on a basket of shares of 20 profit-making CPSEs, is aimed at obtain better price for equity of state-owned companies during the disinvestment process.

The 20 companies would include blue chip PSUs like ONGC, Indian Oil, Power Finance Corporation, NTPC, NMDC and BHEL.

Recently, the Department of Disinvestment had selected ICICI Securities to act as its adviser to create and market the proposed CPSE exchange ETFs. “The CPSE ETF is likely to be launched in the earlier part of the next fiscal,” the official said.

Recently, the Kelkar committee had also suggested that government should consider ETF comprising shares of PSUs with good financial track records.

An ETF tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.

ETFs were introduced in India in 2001. Currently, there are 33 ETFs having AUM of close to Rs 11,500 crore and held by 6.2 lakh investors. Gold ETFs dominate the ETF market in the country.

Globally, ETFs have been growing at a rapid pace with an annual growth rate of over 34 per cent in the last decade, with Assets Under Management of $1.5 trillion at present.

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