CPSE ETF: How the Government’s PSU Stock ETF Works and What It Holds

Ask a room of Indian investors to name one ETF and a good number will say “the PSU one”. The CPSE ETF is that fund. It holds a small basket of listed government companies, it trades on NSE and BSE like a share, and it began life not as a product idea from a fund house but as a way for the Centre to sell part of its stake in several companies in one go. That origin still shapes what you get when you buy a unit today.

We’ll go through what the fund tracks, what it owns as of the latest index factsheet, how the government used it, and the trade-offs a buyer should be clear about. Every figure below comes from the index provider, the fund house or the government’s own disinvestment records, and each is linked.

What the CPSE ETF actually is

The scheme is run by Nippon India Mutual Fund. Its own scheme page describes it as an open-ended index scheme, listed on the exchanges as an ETF, that tracks the Nifty CPSE Index. The objective is to match the total return of that index, before expenses, by holding the same stocks in the same proportion. The benchmark named on the page is the Nifty CPSE TRI, the total return version that counts dividends.

A few practical details from the same page:

• The inception date is 28 March 2014.
• The NSE symbol is CPSEETF and the BSE code is 538057.
• On the exchange you can buy as little as one unit. Dealing directly with the fund house is only in creation units of 25,000 units.
• Each unit is priced at roughly 1/100th of the index level.
• There is no exit load.

That last-but-one point is handy. If the index were at a hypothetical 6,000, a unit would be worth somewhere near ₹60 before costs and tracking differences. So the fund is cheap to enter in rupee terms, which partly explains its popularity with small investors.

The Nifty CPSE Index behind the fund

NSE Indices built the index for a specific job. The methodology document says plainly that it was constructed to help the Government of India disinvest part of its stake in selected Central Public Sector Enterprises through the ETF route.

To get in, a company has to meet the methodology’s conditions. It must be on the Department of Public Enterprises’ list of CPSEs, trade on NSE, and have more than 51% government holding in the promoter category. The document also sets a free-float market cap screen of more than ₹1,000 crore (averaged over the six months to December 2019) and requires companies to comply with dividend norms.

The index has a base date of 1 January 2009 and a base value of 1,000, and the September 30, 2026 factsheet gives its launch date as 18 March 2014. It is weighted by free-float market capitalisation, with a cap. Per the methodology, weights are realigned so no stock is above 20% each quarter, after the expiry of F&O contracts in March, June, September and December. Between those dates, a stock that rallies can drift above 20%.

The cap stops any one company running away with the index, but it doesn’t make the basket diversified. Eleven stocks from a handful of sectors is still a concentrated bet.

What the CPSE ETF holds right now

Nippon’s index constituents page lists 11 companies, and the NSE factsheet also shows 11 constituents. They are NTPC, Bharat Electronics, Power Grid Corporation, Coal India, ONGC, NHPC, Oil India, Cochin Shipyard, NLC India, NBCC (India) and SJVN.

The factsheet’s top-ten table, as of 30 September 2026, gives these weights:

SJVN is the eleventh holding and doesn’t appear in the top-ten table, so its weight is whatever is left over, under 1%.

By sector, the same factsheet puts power at 44.30%, oil, gas and consumable fuels at 32.35%, capital goods at 22.12% and construction at 1.23%. Add the first two and roughly three-quarters of the fund is energy in one form or another.

A worked example: where ₹1 lakh actually goes

Say you put a hypothetical ₹1,00,000 into the ETF on the day those weights applied. Ignoring cash and costs, your money would be split roughly like this:

• About ₹20,230 in NTPC and ₹20,200 in Bharat Electronics.
• About ₹17,840 in Power Grid and ₹15,390 in Coal India.
• About ₹13,260 in ONGC.
• The other six companies together, about ₹13,070.

Those top five add up to 86.92% of the index. In plain terms, the fund behaves mostly like a portfolio of five large PSUs, with a thin tail of smaller names. If you already hold NTPC or Coal India directly, buying this ETF adds more of the same rather than spreading your risk.

Bharat Electronics is the odd one out. It is a defence electronics maker, which is why capital goods carries a weight above 22%. Its share means the fund is no longer a pure utilities-and-energy play.

How the government used the ETF to sell stakes

This is the part that makes the CPSE ETF unusual. Normally the government sells PSU shares through an IPO or an offer for sale in one company at a time. With the ETF, it could sell slices of several companies at once: investors put money into the fund, and the government sold the fund the underlying shares.

A PIB release from DIPAM, the Department of Investment and Public Asset Management, sets out the logic. It says the ETF lets the government divest multiple stocks across sectors in one bundled instrument, reducing the overhang on individual stocks. The same release says a further fund offer (FFO) was oversubscribed 2.30 times, with ₹13,802 crore of applications against a maximum issue size of ₹6,000 crore. It counted 2,70,712 retail applications worth ₹2,465 crore, about seven times the retail applications in the first tranche of March 2014, and the government realised about ₹6,000 crore.

DIPAM’s disinvestment proceeds archive records six FFOs:

Add those six rows and the total comes to ₹61,350.44 crore across FY2016-17 to FY2019-20. That table doesn’t include the original March 2014 tranche, and the archive shows no CPSE ETF row after FY2019-20.

Why should this history matter to a buyer now? Two reasons. First, each tranche added fresh supply of units, and a further offer could come again if the government chooses. Second, it reminds you who designed the basket. The index was built around companies the government wanted to sell, not around the best businesses in the public sector. Those can overlap, but they aren’t the same thing.

Returns and valuation: what the factsheet says

The NSE factsheet for 30 September 2026 reports these total-return figures for the index (returns over a year are annualised, shorter ones are absolute):

• Quarter to date: -6.26%.
• One year: -1.55%.
• Five years: 24.71% a year.
• Since inception: 14.30% a year.

Those five-year numbers look strong, but look at the one-year figure next to them. The same basket that compounded quickly over five years lost money over the last twelve months. That is what a sector-heavy index does. It has stretches where it leads and stretches where it lags, and you don’t get to pick which one you buy into.

On valuation, the factsheet shows a P/E of 12.02, a P/B of 1.81 and a dividend yield of 2.93% for the index. Its beta against the Nifty 50, based on price returns, is 0.52 over one year and 0.90 over five years, and annualised standard deviation is 14.93% over one year and 20.78% over five years.

A low P/E on a PSU basket is not automatically a bargain. Part of that discount reflects government ownership, regulated returns in power and the swing in commodity prices.

A second worked example: index return vs your return

The fund aims to match the index before expenses, and that gap is worth understanding. Take a hypothetical year in which the Nifty CPSE TRI rises 10.0%. If the fund’s expenses and small frictions from cash and rebalancing cost 0.1 percentage points, the NAV might rise about 9.9%. That difference is the tracking difference.

Then there’s the market price. On the exchange you pay what buyers and sellers agree on, which can sit a little above or below the fund’s indicative NAV. Suppose the NAV is ₹60.00 and you buy at ₹60.30. You’ve paid a 0.5% premium on day one. If you later sell at a discount, the round trip costs you more than the expense ratio ever will. Check the iNAV on the fund house’s site before placing a large order, and use limit orders.

Who the CPSE ETF suits, and who it doesn’t

It can fit someone who specifically wants exposure to large listed PSUs in power, energy and defence electronics, and who likes the dividend tilt that comes with them. Because the benchmark is the total return index, dividends from the underlying companies count towards the fund’s performance; read the scheme documents to see how any payouts to unitholders are handled.

It’s a poor fit as a core holding for someone looking for broad diversification. A Nifty 50 or broader index fund spreads money across banks, IT, consumer and other sectors that this basket barely touches. We’d treat the CPSE ETF as a satellite position at most.

Some questions to ask yourself before buying:

1. Do you already own these stocks? Check your direct holdings and other funds for NTPC, Power Grid, Coal India, ONGC and BEL. Overlap is common.
2. Are you comfortable with sector risk? Power tariffs, coal and crude prices, and defence orders drive most of this index.
3. What happens if the government sells more? A further offer or a stake sale in a constituent can weigh on prices for a while.
4. How liquid is it when you trade? Look at the bid-ask spread and volumes on the day, and avoid market orders in thin sessions.

How it compares with other ETFs on the site

If you’re new to ETFs, our pieces on the Bharat Bond ETF and the gold ETF in India cover the same mechanics of units, NAV and market price for different underlying assets. Bharat Bond was another government-backed ETF, but it holds PSU bonds, not shares. And if you want to understand why the government keeps trimming stakes in listed companies, our explainer on minimum public shareholding covers the rule that pushes promoters, including the state, to sell down.

The short version: the CPSE ETF is a cheap, simple way to own a concentrated slice of India’s largest listed PSUs. Buy it because you want that slice, not because it happens to be called an ETF.

Disclaimer: This article is for educational purposes only and is not investment advice. The rupee amounts, index levels and prices in the worked examples are hypothetical. Index weights and returns change; check the latest NSE Indices factsheet and Nippon India scheme documents, and consult a SEBI-registered adviser before investing.