2014 Lok Sabha Congress Manifesto: Trillion Dollars on Infrastructure

Writing a post on the Congress Manifesto for the Lok Sabha elections seems like an utter waste of time because it’s quite unlikely that they come to power, and even if they did, past record shows that they aren’t likely to implement any of what they say anyway.

Much of what I read seemed to be a continuation of the policies discussed earlier with promises for faster implementation, but it would take a foolishly optimistic person to believe that the time frames discussed can ever be reality.

One thing that did catch my eye was the promise to spend a trillion dollars on infrastructure over the next decade, and I was interested to see how they arrived at that number, and if it was anything more than a sound bite.

In order to do so, I first started with the comparison of how much money the government currently spends on infrastructure.

I found that Rs. 1,81,634 crores was allocated to infrastructure in the 2014-15 budget, and that translates to about $35 billion according to the current exchange rate. So, just based on the what the government spends on infrastructure this target seems really ambitious and been inserted there for a sound bite instead of really ever having any real hopes of being met.

However, the Twelfth Five Year plan which runs for the years 2012 – 17 also gives  an infrastructure spending target which is the same – a trillion dollars in 5 years. The key difference is that the five year plan says that the share of the private sector should be 48% in the total infrastructure spending, so in that sense I feel that the origin of the trillion dollar in a decade number must really be the five year plan, and while I think it is improbable that the Congress or any other government achieves this, the target is not a complete sound bite.

Weekend Links March 28 2014

Quick weekend post because I’m running short of time, here are the 7 best posts I read during the week:

Economist on the rise of the robots

WSJ has an interesting story on how Facebook is trying to beam the internet to remote places. 

Very interesting story about an incredibly successful venture capital firm. 

Baseline Scenario has a great post on Economics and a new book on the subject.

Some excellent advice on how to criticize with kindness.

VC Fred Wilson explains why technology companies are spending billions on acquisition. 

Amazing TED video of Larry Page talking about the future of Google and the future in general. 

Should NRIs bother to invest in India?

Chauhan left the following comment on the Suggest a Topic page recently.

Chauhan March 17, 2014 at 1:26 pm [edit]

I’m keen that we somehow start a theme that compares keeping your money abroad (in say USD, GBP or SGD etc) vs sending it to India for investment purposes. Which is to say, how do foreign currency gains v the Indian rupee compare with high interest rates (on a/c of high inflation) in India.


My first impression was that it was indeed futile for most NRIs to send their money back home for investing because of how fast the Rupee has depreciated recently, but further digging revealed that it wasn’t really the case.

NRE accounts were made tax free, and the interest rate was raised to domestic savings rate on them in December 2011, and at that time there was quite a lot of excitement about them, and a lot of money did find its way to Indian NRE accounts.

The USD to INR rate was about Rs. 51 at that time, and right now it is about Rs. 62, which is a depreciation of about 17%.

So, roughly speaking, if you were an American NRI who were thinking of opening a NRE bank account back in December of 2011, but didn’t do anything yet (28 months) you had a 17% return.

However, if you had invested your money in a NRE account at that time then you would have made about 25% on your money. This is assuming the NRE rate was 10% for 28 months, which is the rate several banks were offering at the time, but none are offering today. The rates are around 9% right now.

So, if you were in the US then it was obviously better for you to have sent money home, and opened a NRE account, but what about other countries?

I plotted the same data for some other countries UK, Singapore, Australia, UAE and Canada and here are the results.

Currency Gains Versus NRE Interest Rates

As you can see, only GBP has been able to keep up with the Indian interest rates, and the rest of them have been lagging behind, some considerably so.

I feel it is a function of the high domestic interest rates, and the fact that most of the global economies aren’t doing that great that has resulted in these numbers.

Will these results continue to hold up in the future? I’m going to say, probably yes because the interest rates are still high at about 9% right now, and that results in a gain of about 54% in 5 years , and I think the probability of the Rupee losing half its value against these currencies in the next five years is probably lower than that.

Is silver the new gold?

Radhika left the following message a few days ago, and I thought this was an interesting topic for a post.

Radhika March 18, 2014 at 5:06 pm [edit]


Can you please explain the reason for the increasing importance of silver and why people are advising you to buy more silver now as it will be an important investment for the future? How did the importance shift from gold to silver? Also, what is the best way to invest in silver?



In the US, the silver ETF  – SLV has gone down by almost 30% in the last 12 months, and in India, silver price is down about 20% in the last year or so.

The popularity of silver, or rather the higher imports (in terms of volume) is real though and silver imports rose by 180% in 2013.  

These high imports are attributed to the increasing use of silver in jewelry as gold prices rise, and is very different from the rise in the demand for gold since that was mainly for investment purposes.

Nothing has changed in the economic environment in the past few years to make me feel that silver should have a place in my portfolio, and it is only fair that I mention here that I was wrong about gold for a long time, so there’s really no reason for you to listen to me about silver.

However, if you do wish to know my view, I feel that gold may have a small part in your portfolio, mainly as a hedge against the depreciating Rupee, but I don’t see where silver fits in, and what purpose that serves. And for Indians, there isn’t really a good way to invest in silver either.

For some reason there has been no silver ETF in India, and I think that is a major disadvantage for Indians since I believe  ETFs are the best way to invest in gold and silver. You don’t have the hassle of worrying about purity or of incurring heavy commissions while selling your gold or silver bars, and of course you don’t have to worry about its physical protection either.

Given that this great option is not available, what are the other ways possible to buy silver for Indians?

How can Indians buy silver online?

Buy US Silver ETFs by enabling overseas trading in your brokerage account

About a few years ago, Indians were allowed to invest in overseas ETFs, and shares, and there are several US silver ETFs that are available to Indians who have activated this feature on their brokerage account. So, this is one novel way of getting exposure to silver for Indians. The only additional thing you have to consider is that when you invest in any of these US based funds, not only are you taking a position in the fund, you are taking a position on the USD-INR rate also because the exchange rate will affect your returns.

Buy a Silver Futures Contract on the Commodity Exchange

You can buy a silver futures contract at the commodity exchange, and this will give you a way to get exposure to silver online. However, these futures contract are shorter term in nature, and since silver is a relatively volatile commodity, I wouldn’t recommend going this route to investors. This is a good way to speculate but if you are looking to include silver as part of your portfolio, then this is not really the way to do it.

As far as I know, there aren’t any other safe and viable online ways invest in silver online.

Buy Silver Bars

I think not a lot of people will have an appetite for the two options mentioned above, and if you fall under that category then you can look at just buying silver bars from a jeweler or maybe a bank. The big issues with buying gold or silver from a jeweler is how they deduct money when they buy it back from you, and it can be a big hassle. One way to avoid this that commonly comes up when we discuss gold bars is to exchange that with jewelry and in that way don’t incur these losses, but I don’t know how far that is possible when it comes to silver.


My personal opinion is that there’s really no place for silver in my portfolio, and I don’t see any strong rationale to get into silver positions. If you want to hedge against Rupee depreciation, or inflation, then buying foreign stocks, and gold may be a much safer alternative especially given how limited the current options to buy silver are. If you want to invest in silver, I’d say this should be in limited quantities as silver has been quite volatile in the past, and you don’t want to expose yourself to that volatility too much.

Weekend links March 21st 2014

I’ve read plenty of ridiculous articles about the missing Malaysian plane, and I call them ridiculous because of their sensationalist nature, and how easy it is to see that a lot of publications are writing what they think the readers want to hear, not what the readers need to hear.

In that context, I really liked Wired’s startlingly simple theory about the Malaysian airline jet, which was not sensationalist, and did a good job of going into the details of a theory that might actually be substantive.

On a related note, I’m worried at how many people I know who think it is more likely that the plane got sucked into a fourth dimension than it is that it’s buried deep in the ocean.

The Economist on the annexation of Crimea by Russia. The tone is a bit dire, and I’m unable to decide if they are over-reacting, or if I don’t understand the situation fully myself. I must admit though that till about a week ago, I would’ve agreed with the tone but then I met with a a Ukranian woman who belongs to a region close to Russia, and she pretty much said it is justified, and that people’s lives in those areas are in danger, and that changed my view of the situation a bit.

I was surprised to hear that Turkey has decided to ban Twitter, I’m fairly certain this ban would prove futile, and will embarrass the government, but it is sad to see that even a seemingly progressive country like Turkey can try such tactics.

More surprising was Britain’s plan to vote on a law that can strip a person of their citizenship as a form of punishment. It seems that such a law already exists and they have used it on 16 people since the current government came to office; all of them probably linked to terrorism.

I liked reading this post about behavioral finance: Financial Decision Making: A slap on the face. 

I quite enjoyed reading Magnus Carlsen’s AMA (Ask Me Anything) on Reddit.

Finally, the Amreekan Desi excellently summarizes everything I feel about Arvind Kejriwal. 

How to invest in Goldman Sachs CPSE ETF – Online & Offline?

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Goldman Sachs is out with its new fund offer (NFO), Goldman Sachs CPSE ETF. The purpose is to facilitate the government’s initiative to reduce its shareholding in some of its public sector enterprises and thereby meet its revised disinvestment target of Rs. 16,027 crore. Though there is a lot of interest among the retail investors as far as this scheme is concerned, but when it comes to investing, there is a complete lack of interest from the distributors, brokers, government, Goldman Sachs itself and other service providers.

I think either they are not interested in retail investors participation or the groundwork has not been done in a systematic manner by any of them before launching this scheme. When it comes to handholding investors, I think nobody is interested.

Why is it so?

When it comes to taking active and responsible initiatives, the track record of our government has been very poor. We have witnessed such systematic failures earlier as well, with the RBI’s inflation indexed bonds and Rajiv Gandhi Equity Saving Scheme (RGESS). I think the government is interested only in meeting its disinvestment target this time or probably it is too busy campaigning for the general elections.

Goldman Sachs has very limited infrastructure to entertain investors’ queries. Also, very few number of distributors have been empanelled with them to make this channel successfully participate in their efforts. I called their toll free number 1800 266 1220 on many occasions in the last couple of days, but I never succeeded even once. I sent a mail also asking for the online/offline procedure to do this investment, against which I received the following response:

Dear Sir, 

With reference to your below mail please find the KIM cum Application Form for CPSE ETF. The demat  account is compulsory as the holding is in dematerialized mode only. Retail Individual Investors can invest in the Scheme with a minimum investment amount of `5,000/- (Rupees Five Thousand only) and in multiples of `1/- (Rupee One) thereafter. We would request you to refer the “Application Size for Determining Investor Category” section under page no. 5 of the attached KIM cum Application form for more details. You may also download the Scheme related other materials from our website www.gsam.in.


The NFO is available in NSE MFSS and BSE Star MF platform, you may invest online if your broker is providing these platforms.

Please note that the NFO period for retail investors is from 19th March’14 to 21st March’14, you may submit the duly filled application form at any of the NFO collection points as mentioned under page 15 & 16 of the attached KIM cum Application Form.

 For any further assistance please reach out to us on 1800 266 1220(toll free) or mail us atgsamindia@gs.com


Client Service Team,

Goldman Sachs Asset Management (India) Pvt. Ltd

As the investors are feeling very much helpless, you must be wondering why you are not getting any phone calls or mails from your broker(s) and why there is no active participation from the mutual fund distributors either. The answer lies with this statement – “The Scheme shall not incur any distribution expenses and no commission shall be paid by this Scheme”. This statement I have picked from the Scheme Information Document (SID). From this statement, it is very much clear why intermediaries are not running after you.

Now, let’s check the important thing. How to invest in this CPSE ETF – online or offline?

Online Investment

First important thing is that you cannot hold CPSE ETF’s units in a certificate/physical form. You need to understand that as this fund is an exchange traded fund (ETF), you need to compulsorily have a demat account to invest in this fund during the offer period, and also to subsequently hold them when this fund gets listed on the stock exchanges. If you don’t have a demat account, it is very difficult to get it opened and invest in this scheme, all in a single day. But, you can still make some efforts and try your luck.

Though I don’t have the list of brokers which are providing online investment facility to invest in this scheme, one thing is clear to me that they are not actively marketing this product. As I am writing this post, I know Kotak Securities, Edelweiss, ICICI Direct and FundsIndia are providing this facility to their clients. As I have demat/trading accounts with Kotak Securities and Edelweiss and I am associated with FundsIndia Advisor as an independent investment advisor, I am going to explain their respective online investment procedures.

Kotak Securities – You need to first login to your Kotak Securities online platform. Click on the “Mutual Fund” tab on the top of the webpage, click on “Place an Order”, select your holding pattern, select fund house to be “Goldman Sachs Mutual Fund”, select either “CPSE ETF Retail” if your investment is Rs. 2 lakhs or below or “CPSE ETF HNI” if your investment is more than Rs. 2 lakhs.

Edelweiss Broking – With Edelweiss also, you need to login to their trading platform. Click on the “Mutual Fund” tab, click on the “Purchase” option, select “G S Asset Mgt(I) P Ltd” as the AMC, select “NFO Equity” as the category, select the series to be “Growth” and the scheme name to be “CPSE ETF”.

FundsIndia Advisor – If you are already registered with FundsIndia as an investor, you need to click on the “Invest” tab as you login to your online account. Click on the “New Investment” tab, click on the “Select Scheme” box, select “Goldman Sachs Mutual Fund” as the AMC, select NFOs from the scheme classification dropdown and click on ‘Search’. You will get “Goldman Sachs CPSE Exchange Traded Scheme – Growth” as the scheme.

Select the scheme, type the amount which you want to invest and click on ‘Continue’. Select your depository name as NSDL or CDSL, fill your DP ID, DP name and beneficiary/demat account no. and click on Save. You’ll be required to transfer the investment amount afterwards.

ICICI Direct – As KS and Sanjay confirmed to me yesterday, ICICI Direct is also providing online investment facility for this scheme. It is under the “Mutual Funds” tab on ICICI Direct’s platform and you need to select ‘NFO’ to reach to this scheme.

I could write about the online investment procedure of these service providers only. If any of you have anything to share about your broker’s process, please share it share and I’ll update it in this post.

Also, people who have online investment facility with their broker should look out for this scheme under the Mutual Fund section as well as under the IPO/NFO section, you never know under which section this scheme has been placed by your broker.

Offline Investment with a physical common application form

If your broker is not providing online investment facility, here is the process to invest in this scheme offline:

As it is clear that a demat account is compulsory to invest in this scheme, now you need to download a common application form to subscribe to its units. You need to duly fill this form with all the relevant details like the investor category, name of the applicant(s), his/her/their PAN number(s), date of birth, demat account details, address & contact details, status, occupation and bank details of the first/sole applicant.

There are certain important points which you need to pay attention to while filling this form:

Mode of Holding – The mode of holding for subscribing to these units should exactly match the mode of operation of the demat account as specified in the Depository Participant’s record. e.g. If you have a joint demat account in your and your spouse’s name, you being the first applicant, then only you should be the first applicant and your spouse the second applicant in this scheme.

Bank Account Details – While filling your bank account details, make it sure that you mention details of your bank account which is linked to your demat account.

Cheque/DD – Your investment cheque or demand draft should favour “CPSE ETF” and as always, must be account payee only. In order to protect yourself from fraud, you must mention your name (as the sole/first applicant) and application number on the back of the cheque/demand draft. In case you don’t find the application number on your form, you must mention your demat account details and PAN number along with your contact number.

Documentation – Retail individual investors are required to attach only two documents along with their application form and investment cheque/DD

(i) KYC compliant proof

(ii) Self-attested PAN card copy

Nominee – As there is no place to mention nominee details in the form, you need not panic about it. As with all your demat/electronic investments, the person who is registered as the nominee in your demat account will remain your nominee with this investment as well.

Investment above Rs. 2 lakhs – If you are investing more than Rs. 2 lakhs, then you’ll be considered as a non-institutional investor. You should tick your investor category accordingly in that case.

Investment for a Minor – Investment in the name of a minor is allowed in this scheme, but there should not be any joint investment in that case.

Where to submit your applications?

Once your application form is duly filled and the relevant documents are attached, you need to submit this form at any of the Investor Service Centres of Karvy Computershare. Here is the link to all those service centres along with their contact details – http://www.benchmarkfunds.com/gs/Documents/NFOCOLLECTIONPOINTS-CPSEETF.pdf

Even if your broker is not providing online or offline investment facility to you, you can call on the customer care number of your broker and ask for some kind of assistance in this matter. There is a possibility that your broker takes your request over the phone itself and applies for this scheme on your behalf subject to funds availability.

Lack of enthusiasm by the broker and the distributor community has once again proved that they don’t care about their clients and clients’ welfare. They still like to service only those products in which there are high commissions/incentives.

CPSE ETF NFO – Tax Saving u/s. 80CCG, 5% Discount, Bonus Unit, 3.5% Dividend Yield, 10.5X PE & Much More

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

CPSE ETF Further Fund Offer (FFO) – January 2017 Issue – Click Here

We are at the fag end of the current financial year and as always, the government is doing everything it can do to meet its revised target of garnering disinvestment proceeds. It had set a highly ambitious target of raising Rs. 40,000 crore from disinvestment in the beginning of this financial year, but then curtailed it by more than 50% to Rs. 16,027 crore last month in February 2014. I hope it doesn’t fail in its efforts to meet even this revised target.

Before we move forward to know more about our target subject, we need to have some basic understanding of a new index, called CPSE Index, which has been launched by the National Stock Exchange (NSE) and owned & operated by India Index Services & Products Limited (IISL).


NSE today launched CPSE Index, in which CPSE stands for central public sector enterprises. As the name suggests, this index comprises of some of the big public sector enterprises and here you have the list of those companies.

CPSE Index Composition as on February 28, 2014 & Trade Data as on March 19, 2014Picture5.png

CPSE Index has been launched for a specific purpose and the purpose is to facilitate Government of India’s initiative to sell its stake in some of these CPSEs. In fact, the finance ministry wants to raise an additional Rs. 3,000 crore for its disinvestment programme this financial year and it will be using this CPSE ETF to garner its targeted amount.

CPSE Index has base date of 1st January, 2009 and base value of 1,000. As mentioned above, this index got launched today and stood at 1,898.10 by the end of today’s trading hours. The weights of its constituents will be re-aligned every quarter effective 2nd Monday of February, May, August and November every year.

Goldman Sachs CPSE Exchange Traded Fund (ETF)

Goldman Sachs CPSE ETF is an open-ended index scheme, to be listed on the stock exchanges in the form of an Exchange Traded Fund (ETF) tracking the CPSE Index. This ETF has been launched by Goldman Sachs Asset Management Company Limited and is named as Goldman Sachs CPSE ETF. It is also known as the PSU ETF.

The government of India has authorised only Goldman Sachs to launch this ETF. I would call it GS CPSE ETF or just CPSE ETF for the rest of this post.

Anchor investors have already invested Rs. 850 Crore in this ETF today, so this scheme would require another Rs. 2,150 crore to meet its targeted amount.

Out of the proceeds collected during the NFO period, this scheme intends to purchase the CPSE shares, as represented in the constituent companies of the CPSE Index, in similar composition and weightages as they appear in the CPSE Index. The President of India, represented through different departments and ministries, will sell the shares at a discounted rate to the scheme and the mutual fund will in turn create and allot units of the scheme to its investors.

Subsequently, after the closing of the NFO, the units will get listed on the stock exchanges in the form of an ETF tracking the CPSE Index.

Investment Objective – The scheme intends to generate returns that closely correspond to the total returns earned by the securities as represented by the CPSE Index. However, the performance of the scheme may differ from that of the CPSE Index due to tracking error and also due to scheme expenses.

NFO Opening & Closing Dates – For the non-anchor investors, this fund will open for subscription from tomorrow i.e. March 19th and will run for three days to close on March 21st.

Features of GS CPSE/PSU ETF

Reference Market Price/NAV – New Fund Offers, or popularly known as NFOs, normally get launched at Rs. 10 per unit as their NAV. This will not be the case with this scheme. During the NFO, each unit of this scheme will have a face value of Rs. 10 and will be issued at a premium, equal to the difference between the face value and the allotment price.

NAV of this scheme will be based on the CPSE Index, as the allotment price would be approximately equal to 1/100th of the CPSE Index and would be calculated post adjusting the 5% discount offered by the government to CPSE ETF for buying the underlying CPSE Index shares.

Going by the CPSE Index’ closing value of 1898.10 today, the allotment price of this scheme should get fixed at around Rs. 18 per unit once the allotment gets done. So, if you decide to invest Rs. 1.80 lakh in this scheme, you will be getting approximately 10,000 units of GS CPSE ETF.

5% Discount for Investors – Investors making an investment during the offer period will be given a 5% discount on their investment. This 5% discount on the “Reference Market Price” of the underlying CPSE Index shares will be offered to CPSE ETF by the government of India.

1 Loyalty Unit for Every 15 Units Held – Sops don’t stop with just 5% discount. The investors, who remain loyal to this scheme and hold on to their investments for one year from the date of allotment, will be allocated 1 additional unit for every 15 units held on the record date in March/April 2015. Record date will be determined as the date falling exactly one year from the date of allotment.

Loyalty units would be credited to the demat account of the eligible investors within 30 days from the record date. Non-retail investors will not be offered loyalty units under this scheme.

3.5% Dividend Yield – Based on the dividend paying pattern of these CPSEs, the dividend yield works out to be in the range of 3.5% to 3.8%. Though I do not give much weightage to dividend yield for my personal investments, I think a healthy dividend yield of 3.8% reflects that there is reasonable margin of safety with these companies and downside in their market prices is fairly limited.

10.5X PE Ratio – Price to earnings ratio (P/E Ratio) of CPSE Index is ruling at around 10.5 times these days, which is a steep discount to its historical averages and also a steep discount to Nifty’s P/E multiple of approximately 18.2. This makes CPSE ETF quite attractive from valuations point of view.

Minimum/Maximum Amount to be Raised – The scheme seeks to collect a minimum target amount of Rs. 100 Crores during the NFO Period. Maximum amount to be raised stands at Rs. 3,000 Crores, beyond which the money will be returned back to the investors.

Minimum/Maximum Investment Size – Retail individual investors can invest in the scheme with a minimum investment amount of Rs. 5,000. To remain a retail investor, the investment limit has been set at Rs. 2 lakhs.

Listing – Goldman Sachs has obtained an in-principal approval of NSE and BSE for listing the units of this scheme and the listing would be carried out by the fund house on or before 11th April, 2014.

Demat Account Mandatory – As this is an ETF, the units of the scheme will be available only in the dematerialized/electronic mode. So, you have to mandatorily have a demat account to own its units. Applications without relevant demat account details are liable to be rejected.

Tax Saving u/s. 80CCG – GS CPSE ETF is in compliance with the provisions of Rajiv Gandhi Equity Savings Scheme (RGESS) and thus qualifies for a tax exemption up to Rs. 25,000 under section 80CCG.

As many of you would know, to avail tax benefit u/s. 80CCG, there are two most important conditions. One, your gross total income should not exceed Rs. 12 lakh mark and second, you must be a first time investor in equities. Though it is quite difficult to satisfy both these conditions simultaneously, people who fulfil both these conditions should actually avail tax benefits with this scheme.

Lock-In Period – Investors, who seek tax exemption u/s. 80CCG, will be subject to a lock-in period of 3 years – 1 year of fixed lock-in and 2 years of flexible lock-in. The fixed lock-in period will start from the date of your investment in the current financial year and will end on March 31st next year i.e. 2015.

The flexible lock-in period will be of two years, beginning immediately after the end of the fixed lock-in period i.e. beginning April 1, 2015 till March 31, 2017.

There is no lock-in period applicable for those investors who don’t avail any tax benefit. But, then it is advisable to hold on your investment for one year in order to get loyalty units.  

Entry & Exit Load – There is neither any entry load nor any exit load with this fund.

Categories of Investors & Allocation Ratio

Anchor Investors – 30% of Rs. 3,000 Crores i.e. Rs. 900 Crores

Non-Anchor Investors, including Retail Individual Investors, Qualified Institutional Buyers (QIBs) & Non Institutional Investors – 70% of Rs. 3,000 Crores i.e. Rs. 2,100 Crores

As the anchor investors have already poured in Rs. 850 crore, the leftover pie of Rs. 2,150 crore will be available for the retail individual investors, qualified institutional buyers (QIBs) and non-institutional investors.

Fund Manager – This scheme will be managed by 33-years old Payal Kaipunjal, who is an MBA from Wellingkar Institute of Management and also a Financial Risk Manager (FRM) from GARP University. She has a total experience of 9 years and worked with Benchmark Asset Management Company before it got acquired by Goldman Sachs India in 2011.

She has been working with Goldman Sachs since August 2011 and has been managing GS Junior BeES, GS PSU Bank BeES and debt securities portfolio of GS Hang Seng BeES.


High Exposure to Energy Sector – CPSE Index has an exposure of approximately 59% to the energy sector, with stocks like ONGC, GAIL, Oil India and Indian Oil. So, if not exactly a sector fund, this ETF is highly tilted towards the energy sector.

High Exposure to Public Sector Managements – We all have been hearing of policy paralysis for a very long time now. All these companies are public sector enterprises, in which we all know how policies get framed out and implemented, how things get executed and how good their managements are. So, despite of cheap valuations, it is a big risk if things don’t move as expected.

Passive Management – ETFs are passively managed funds and their performance largely depends on the index they track. As GS CPSE ETF will track the CPSE Index, its performance will completely hinge on the performance of the constituents of CPSE Index. So, in case there is trouble with any of these companies, the fund management will not be able to sell that particular stock till the time the stock moves out of this index.

Final Take

CPSE Index constituents have risen 8.91% in the last 30 days, while they have given a negative return of 2.44% in the past one year. Going by the valuations of these CPSEs and the number of sops this ETF will offer to its retail investors, I think it is giving a great opportunity to the long-term conservative equity investors, who still have a belief that the future holds some kind of promise or scope of improvement for these CPSEs and still have some kind of faith in the policy execution of the next government.

Personally, I would like to invest some part of my money into this ETF as I think most of these CPSEs are quoting at a steep discount to their life time highs and also to their historical average PE multiples. Though the stock prices of these CPSEs have run up quite rapidly in the last month or so, I still think there is enough value in these companies.

Also, I am hopeful of a strong government taking charge at the centre as the election results get announced in May. I think a strong, decisive government can have a dramatic effect on the sentiment driving the stock prices of these CPSEs.

Also, as a human nature, discounts and freebies attract me as well. I think 5% discount and a bonus unit after one year of investment are reasonably good attraction triggers for me.

Investors, who do not have a demat account and wish to save tax under section 80CCG, will have only 3 working days for them to get a new demat account opened in compliance with the provisions of Rajiv Gandhi Equity Savings Scheme and invest in this scheme. So, please hurry and avail the benefits of this scheme.

KIM & Application Form of Goldman Sachs CPSE Exchange Traded Fund

Ides of March Links

Let’s start with this wonderful post about why your financial plan should not be just about money. I think a lot of people intuitively understand this but you don’t often see this written in black and white.

The story of the Malaysian missing jet has been fascinating, sad and incredible, and this article from the NYT tells you about the latest situation.


I really liked the insight from VC Fred Wilson on this question  – Are we in a bubble?

Harvard Business Review has a good post titled why work is lonely. It deals with how at a certain level you mostly get people agreeing with you, and can’t get objective disagreements that will help you take balanced decisions, and what you can do about it.

I’ve discussed decoupling a few times here, and more evidence that decoupling happened, but not in the way it was expected.

I discovered this unusual app recently whose sole purpose is to provide coffee shop noises in the background while you work. Apparently, there is some research that shows this type of noise is good to stimulate creativity. I’ve used it for a few hours, and right now I can say for sure that it isn’t hurting my concentration or creativity, but I don’t know if it has actually helped any.

Finally, a great article pondering the origin of the universe, and if in fact, ours is the only universe.

Enjoy your Sunday!

India Infoline Housing Finance Limited (IIHFL) 12% NCDs – March 2014 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

India Infoline Housing Finance Limited (IIHFL), which came out with its first public issue of secured non-convertible debentures (NCDs) in December, has decided to launch another such issue from tomorrow, 12th of March. The company offered 11.52% per annum as the interest rate to raise Rs. 500 crore in December and wants to raise another Rs. 200 crore from this issue with a higher rate of interest of 12% per annum.

The issue is scheduled to close on March 24, but going by the size of the issue, the response it got for its last issue and a fairly attractive interest rate of 12% p.a. payable monthly, I think it should get oversubscribed in a very short period of time, probably in a day or two. One thing which has left me disappointed is that these NCDs are unsecured in nature, whereas NCDs issued last time were secured.

Before we check how the issue looks from an investment point of view, let’s take a look at some of its key features:

Interest Rate on Offer & Effective Yield – Like last time, the structure of this current issue is fairly simple. The company has decided to offer 12% p.a. payable monthly for a tenure of six years, as compared to 11.52% p.a. it offered last time for five years.


This issue also offers to double your investment amount in the same time period, if the investor decides to go for the cumulative option. With the cumulative option, the effective yield works out to be approximately 12.25% p.a., whereas the same stands at approximately 12.68% p.a. with the monthly interest option.

Credit Rating & Size of the Issue – CRISIL and ICRA have been appointed as the credit rating agencies for this issue and both have rated the issue as ‘AA-’ with a ‘Stable’ outlook. IIHFL wants to raise Rs. 200 crore from this issue, including the green shoe option of Rs. 100 crore.

Foreign Portfolio Investment – Non-Resident investors, including NRIs, QFIs and FIIs, are not eligible to invest in these NCDs.

Categories of Investors – The company has decided to categorise investors in the following three categories:

Category I – Qualified Institutional Bidders (QIBs) – 30% of the issue is reserved

Category II – Non-Retail Investors including HNIs, HUFs, Corporates etc. – 10% of the issue is reserved

Category III – Retail Investors, including HUFs, investing Rs. 10 lakh or below – 60% of the issue is reserved

Allotment on First Come First Serve Basis – Allotment will be made on a first come first served (FCFS) basis.

Minimum Investment – An investor needs to invest a minimum of Rs. 10,000 in this issue i.e. 10 NCDs worth Rs. 1,000 each.

Listing – The company has decided to list its NCDs on the National Stock Exchange (NSE) as well as on the Bombay Stock Exchange (BSE) and as always, the company will ensure that these NCDs get listed on the exchanges within 12 working days from the closing date of the issue.

Liquidity & Demat A/c. – As these NCDs will get listed on the stock exchanges, its investors will have the option to sell them whenever they want or have any urgent cash requirement. But, it is not mandatory to have a demat account to invest in this issue. You can subscribe for these NCDs in physical form as well, like you invest in bank/corporate fixed deposits (FDs) or post office schemes.

Interest Payment Date – IIHFL has decided to pay interest on the investors’ money on a monthly basis, but has not fixed the date of interest payment as yet. Interest payment will start from one month after the deemed date of allotment and will keep on getting paid on the same date every month.

Past Performance of India Infoline Housing Finance Limited (IIHFL) NCDs

I had reviewed IIHFL’s profile and financials when I covered its last issue in December. As the company has not updated its latest financial results in the prospectus filed for this issue, I have not been able to review its December quarter results. If you want to check its results up to September 2013, you can check the December post.

So, as there is nothing new on the financials front, let us focus on the performance of its NCDs issued last time around. Price of its already listed NCDs hit a 52-week high of Rs. 996.70 and a 52-week low of Rs. 899.90. It closed at Rs. 968.84 on the NSE today, which I would say is a steep discount to its face value of Rs. 1,000.

The company pays the due interest for its already listed NCDs on 27th of every month and the record date for the same falls due on 17th of that month, which means these NCDs go “ex-interest” two trading days prior to that. So, its current price of Rs. 968.84 already carries some portion of its current month’s interest also.

Though I think 12% annual rate of interest is fairly attractive, the nature of its current NCDs to be unsecured and the performance of its NCDs issued last time make me feel that it is better to avoid this issue at present and wait to buy these NCDs later from the stock exchanges when they get listed.

A long term investor, who is not liable to pay any taxes, wants regular income on a monthly basis and carries a little risk appetite, can subscribe to this issue as I think this issue looks relatively attractive to me as compared to its last issue.

Application Form of IIHFL NCDs

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in IIHFL NCDs, you can contact me at +919811797407

Markets at all time highs – what should you do now?

The market hit a new all time high last week, and it is natural for people to wonder if they should do anything differently now that the market has reached such levels.


What you should do really depends on what kind of investor you are. If you are the kind that has never invested in the market, and is asking if this is a good time to begin, then I can tell you with certainty that the best time to invest is when the market is down, not up, and also that this advice is almost impossible for anyone in your situation to follow.

So, for all practical purposes, for you, this time is as good as any to begin investing in the market.

For others like me who have been in the market for longer, and are simply wondering if it is time to book some profits or exit out of the market completely, I can share what my thought process is and then you can decide if it makes sense to you or not.

When I  read about the market making all time highs, my first reaction was – sure – all time nominal highs, but not really real highs are they?

I say that because there has been widespread inflation, companies have increased prices, their nominal profits have increased so it is only natural that the index value increases at some point to match those increased nominal values.

To see if this is really the case I took a look at the Nifty P/E levels for the past few years, and here’s a chart based on NSE data.

Screen Shot 2014-03-09 at 7.45.44 PM

As you can see the market has been here several times before, and we are not even up to the average of yesteryears which is around 19. So, although the market has made a nominal high, you can’t really say that the market has moved to irrational or that the index is at unjustifiable levels.

For a long term investor like me, I am happy to see the markets do well but this doesn’t prompt any change to my investing game plan right now. I will continue to invest more money, while adding to my cash reserves because I love to deploy the bulk of my money during crashes, but I don’t see myself booking any profits right now just because the market has made nominal highs.