CPSE ETF Managed by Reliance Nippon Life Asset Management Limited - PowerPoint PPT Presentation

CPSE ETF Managed by Reliance Nippon Life Asset Management Limited (An Open-ended Index Exchange Traded Scheme) (Rajiv Gandhi Equity Savings Scheme (RGESS) Qualified Scheme) *Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Slide 1

Table of Contents Introduction to Exchange Traded Funds (ETFs)  Development of International & Indian ETFs Market  Advantages of ETF  Disinvestment Through an ETF  Nifty CPSE Index  CPSE Exchange Traded Scheme  Appendix Slide 2

Introduction to Exchange Traded Funds (ETFs) Slide 3

Introduction to Exchange Traded Funds (ETFs) An Exchange Traded Fund (ETF) is primarily a mutual fund scheme which is listed and traded on a stock exchange. An ETF can invest in: Equities – replicating the composition and performance of an equity index (e.g.  Nifty 50 Index, Nifty Next 50 Index) Commodities – tracking the actual price of a commodity (e.g. Gold)  Money market instruments – which include short-term government securities  and call money Debt Instruments - Government securities with long maturity  Slide 4

Development of International & Indian ETFs Market Slide 5

Growth of ETFs Internationally • - AUM in USD Billion. Source: ETFGI Monthly Newsletter Sept 2016. Latest Available Slide 6

Growth of ETFs in India 32000 70 28000 60 Avg. AUM (Rs. in Crores) 24000 50 No. of ETFs 20000 40 16000 30 12000 20 8000 10 4000 0 0 Dec- Dec- Dec- Dec - Dec - Dec - Oct - Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 10* 11* 12* 13* 14* 15** 16** Avg. AUM 7 168 568 2920 7811 7142 2671 2410 4981 10852 13380 10959 12677 17622 30180 No of ETFs 1 5 6 6 6 12 16 18 26 33 34 39 45 57 66 Source : MFI Explorer *Average AUM for the Quarter. ** Month end AUM (For other periods AUM is Average AUM for Month). Latest Available Slide 7

Advantages of ETF Slide 8

Familiar ground – best of both worlds Like a fund… Like a stock…     Constructed to track an index Trading flexibility intraday on the exchange  Open ended mutual fund  Real time price  Lower expense ratio generally as  compared to an active equity fund Put limit orders   Lower turnover Minimum trading lot is just 1 unit   More transparent Delivery into your Demat account Index fund Stocks ETF Slide 9

Why invest via an ETF? Components of an index have more liquidity  Liquidity ETF liquidity enhanced via direct creation and redemption  Investors can generally see an ETF composition at any given time  Increased transparency Transaction and management cost  Continuous pricing on the exchange throughout market hours  Increased trading flexibility Minimum transaction size (1 unit)  Return potential Likely to capture market average return at low cost   Benefit from lower expense ratios due to lower portfolio management, Lower expenses trading and operational expenses Slide 10

Divestment Through an ETF Slide 11

Disinvestment through an ETF - potential benefits Ability to participate in the long-term development of India, by purchasing stocks  in Infrastructure and Natural Resources arena Provides small retail and HNI investors with the ability to diversify exposure  across a number of Public Sector companies through a single instrument Ease and flexibility of trading given ETFs can be transacted on terminals across  the country Enables large investment in blue chip Public Sector enterprises without the  constraint of market liquidity on the underlying individual stock Efficient cost structure for investors given lower expense ratios than mutual  funds, lower transaction costs due to low STT(Securities Transaction Tax), and eligibility under the RGESS scheme High transparency allowing investors to make informed decisions  Slide 12

Nifty CPSE Index Slide 13

About the Nifty CPSE Index Nifty CPSE Index is constructed in order to facilitate Government of India initiative to disinvest some of its stake in selected CPSEs through the ETF route. The index values are to be calculated on free float market capitalization methodology. The index has base date of 01-Jan-2009 and base value of 1000. Weights of index constituent shall be re-aligned (i.e. capped at 25%) every quarter effective 2 nd Monday of February, May, August and November. Selection Criteria: The 10 CPSE’s selected meet below mentioned parameters: Included in the list of CPSEs published by the Department of Public Enterprise  Listed at National Stock Exchange of India Ltd. (NSE)  Having more than 55% government holding (stake via Govt. of India or  President of India) under promoter category. Companies having average free float market capitalization of more than  Rs.1000 Cr. for six month period ending June 2013 are selected. Have paid dividend of not less than four per cent including bonus for the seven  years immediately preceding or for at least seven out of the eight or nine years immediately preceding are considered as eligible companies as on cut-off date i.e. 28-Jun-2013. Slide 14

CPSE ETF – Portfolio & Industry Allocation CPSE ETF Portfolio No. Company Name Industry Weightage % 1 Oil & Natural Gas Corporation Ltd Oil 25.56 2 Coal India Ltd Minerals/Mining 20.63 Indian Oil Corporation Ltd Petroleum Products 16.55 3 4 GAIL (India) Ltd Gas 10.55 5 Container Corporation of India Ltd Transportation 5.19 6 Power Finance Corporation Ltd Finance 6.00 Rural Electrification Corporation Ltd Finance 5.58 7 8 Bharat Electronics Ltd Industrial Capital Goods 4.57 9 Oil India Ltd Oil 3.07 10 Engineers India Ltd Construction Project 2.14 Total 99.82 Industry Allocation % Oil 28.62% Minerals/Mining 20.63% Petroleum Products 16.55% Finance 11.58% Gas 10.55% Transportation 5.19% Industrial Capital Goods 4.57% Construction Project 2.14% 0% 5% 10% 15% 20% 25% 30% 35% Note: Portfolio & industry allocation data as on November 30, 2016. Source: RMF Internal Slide 15

Nifty CPSE Index Vs Other Broad Indices - Valuations Index Name P/E Ratio P/B Ratio Dividend Yield Nifty CPSE Index 11.48 2.01 4.02 Nifty 50 Index 21.61 3.12 1.34 Nifty Next 50 Index 25.9 3.44 1.59 Nifty 100 Index 22.23 3.17 1.38 Nifty 500 Index 25.09 2.86 1.29 Please note that the stock composition of all the indices are different Data as 30 h Nov 2016. Source : www.nseindia.com Slide 16

CPSE Exchange Traded Scheme Slide 17

CPSE ETF – Scheme Details Investment objective  The investment objective of the Scheme is to provide returns that, before expenses, closely correspond to the total returns of the Securities as represented by the Nifty CPSE Index, by investing in the Securities which are constituents of the Nifty CPSE Index in the same proportion as in the Index. However the performance of the Scheme may differ from that of underlying index due to tracking error. There can be no assurance or guarantee that the investment objective of the Scheme would be achieved. Investment pattern  Indicative Allocation (% of net assets) Instruments Risk Profile Minimum Maximum Securities covered by Nifty CPSE Index 95% 100% Medium to High Money Market Instruments (with maturity not exceeding 91 0% 5% Low to Medium days), including CBLO, cash & cash equivalents. The above stated percentages are indicative and not absolute. Type of scheme  An Open Ended Index Scheme, listed on the Exchanges in the form of an Exchange Traded Fund (ETF) tracking Nifty CPSE Index RGESS  The Scheme is in compliance with the provisions of Rajiv Gandhi Equity Savings Scheme, 2013 (‘RGESS’) Slide 18