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Mutual Fund Corner: CPSE ETF and Bharat 22 ETF are offering negative returns. Should I exit?

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Get all your mutual fund related queries answered by our expert, Anurag Seth, on our show Mutual Fund Corner.

Mutual Fund Corner: CPSE ETF and Bharat 22 ETF are offering negative returns. Should I exit?
Want to invest in mutual funds but don’t know how to go about it?
Get all your mutual fund related queries answered by our expert, Anurag Seth, director and head, global wealth management, Quant Capital, on our show Mutual Fund Corner.

Q: 60-year-old Purushotham BG writes to us from Karnataka. Views on CPSE ETF and Bharat 22 ETF. Both are not generating any returns. Should I exit or hang on?
A: I feel, from individual investor per se, one cannot look at the CPSE ETF as a long-term investment in one’s portfolio. The fund is made of only PSU government-owned companies and that too today it is heavily weighted towards energy stocks. The top four holdings, NTPC, Coal India, IOC and ONGC, account for 80 percent of the fund. Despite being large companies, the performance and the nature of the fund is like a small cap one, means you need to stay in a really long term. So, I feel one should look for other equity mutual fund where more diversification prevails.
For some investors, it might provide better diversification than actually buying a couple of PSU stocks, but investors have plenty to choose from, more so after this correction. The only reason they become tactically interesting is the 4.5 percent discount upfront discount which you get. So buy it, sell it and you make 4.5 percent and assuming that there could be little upside sometimes that could be an opportunity.
The foundation of Bharat 22 ETF was laid by the government in the union budget of 2017 as a vehicle to achieve its divestment target. Bharat 22 ETF is an open-ended exchange-traded fund, which will invest in similar composition and weightages as they appear in Bharat 22 Index. The index is collectively comprised of 22 stocks of Central Public Sector Enterprises (CPSE), Public Sector Banks and private companies which are Strategic Holding of Specified Undertaking of Unit Trust of India (SUUTI). The said 22 stocks are spread across six sectors (Basic Materials, Energy, Finance, FMCG, Industrials and Utilities). The index invests a maximum of 15 percent in a single stock and 20 percent in a particular sector. Weights are rebalanced annually.
For example, look at the below-mentioned portfolio. You have to wait for a really very long term to see a good return. Else go for well-diversified equity mutual fund.
 
 
CPSE ETF
1 Week1 Month3 Month6 MonthYTD1 Year2 Year3 Year5 YearSince Inception
4.93%6.24%6.40%-9.72%-10.77%-16.56%-11.20%34.76%-43.05%
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Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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