November 04, 2025
16 mins read
Diversification is the unsung rule of investing. No matter how often we try to predict the next big mover, the truth is, balance saves us when markets swing. Some people chase tech stocks. Others lean on banks. And then there are those who prefer the quiet stability of government-backed enterprises.
The CPSE ETF—Central Public Sector Enterprises Exchange Traded Fund—sits right there. Imagine buying one instrument and instantly owning a slice of India’s larger PSUs. That is what this fund offers: exposure to the backbone of India’s economy wrapped neatly into an ETF.
The CPSE ETF was not born in a boardroom brainstorm of fund managers but out of the government’s disinvestment strategy. Back in March 2014, when the Department of Disinvestment (now DIPAM) wanted to unlock value from its holdings, it rolled out the first tranche: CPSE ETF 2014. The idea was simple—give investors a way to own PSU giants in one trade, while also helping the state reduce its stake. The debut was well received. Later tranches in 2017 and 2019 carried different mixes of companies, each reflecting the mood of their time. This success encouraged the government to try other themed ETFs like Bharat 22, expanding the experiment. Over the years, CPSE ETFs have become not just a financial product but part of the country’s larger disinvestment playbook.
Look under the hood of the CPSE ETF, and you find names that shape India’s economic skeleton. These are not just companies; they are institutions powering homes, fuelling cars, building ships, and guarding borders.
NTPC Ltd.: The giant of power generation, with capacity across thermal, solar, hydro, and wind.
Power Grid Corporation of India Ltd.: The veins of the country’s electricity network, ensuring power actually reaches homes.
Oil and Natural Gas Corporation Ltd (ONGC).: Producing most of India’s crude oil and natural gas, ONGC is energy security personified.
Coal India Ltd (CIL).: The world's larger coal producer, catering to India's growing energy needs.
Bharat Electronics Ltd (BEL).: Defence electronics specialist—radars, communications, surveillance.
NHPC Ltd.: A hydropower pioneer that later spread into solar and wind.
Oil India Ltd.: The second national oil company following ONGC, with roots in Assam's Digboi fields.
SJVN Ltd.: Focused on hydro projects, now also moving into renewables.
NBCC (India) Ltd.: From construction to re-development, a central infrastructure entity with "Navratna" status.
Cochin Shipyard Ltd.: Shipbuilding and repair for both domestic and global clients.
Together, these holdings offer exposure to energy, defence, infrastructure, and shipping. In other words, they give investors a stake in the country’s strategic backbone.
A CPSE ETF feels almost ordinary when you trade it—it is listed on exchanges like any stock—but the structure has distinct features:
Flexible entry and exit: No lock-in. You can buy or sell anytime during market hours.
Easy to use: Just need one unit to get started.
Index-based: It simply tracks the NIFTY CPSE Index, and effectively mimics the PSU performance.
Equity-based: Mostly equities with a tiny liquidity buffer.
Broadly large-cap: You are exposed to the behemoths of PSU which are relatively stable, and a few mid-caps for the thrill of growth.
Sector driven: Strong tilt towards power and oil/gas.
Passive: Its just tracking IT and there is no expensive fund manager ruining your wealth.
Expense Ratio: 0.05% as opposed to active funds which will be around 2%.
Government backing: A cushion of credibility, since holdings are state-owned.
Suited for long-termers: Ideal for investors seeking stable, dividend-paying PSUs.
Cheap, transparent, and steady—those are its calling cards.
The concept is straightforward. The ETF owns shares of central public sector enterprises. When you buy units of the ETF, you indirectly own fractions of ONGC, NTPC, Coal India, and others. The price of the ETF rises and falls depending on how these companies perform in the market. So you share in their growth, but you also absorb their risks. It is diversification within a defined theme—India’s public sector.
The process is no different from buying a stock, but let’s break it down.
Step 1: Research. Look at past performance, holdings, sector weightage, and whether it fits your risk appetite. Remember—it is tilted toward energy and infrastructure.
Step 2: Choose your tranche. Different CPSE ETFs launched at different times. Compare holdings, expenses, and see which aligns with your strategy.
Step 3: Open a Demat and trading account. If you don’t have it already, you'll need it.
Step 4: Place the order. Look for CPSE ETF, enter the units and determine if you want to place a market or limit order. Once it is filled, the securities will settle in your demat account.
Step 5: Monitor. You need to track NAVs, government policies and sector performance. With PSUs, policy changes matter as much as profits. It is a low-friction way to tap into India’s PSU story..
Like every product, CPSE ETFs come with both comfort and caution.
Diversification across PSUs.
Very low expense ratio.
Liquidity—buy or sell during market hours.
Cost effective.
Stable returns potential, with dividends from strong PSUs.
Exposed to market volatility.
Heavy concentration in energy and power.
Dependent on government policies and disinvestment plans.
Passively managed—no defence in downturns.
Tax implications depending on capital gains rules.
Additional Read: What is the Nifty CPSE Index?
TIH's returns have been uneven from launch, influenced by economic cycles and government policy. The 2014 launch had strong early returns, which reflected a good market and the legislated reforms from early in the 2014 to 2019 administration. Later tranches, particularly both 2017 and 2019, to put it bluntly, had rougher waters with volatility and issues unique to specific sectors. Indeed, short-term returns can switch due to budgets, policies, and global cues. Longer term, the returns seem steadier to this point—dividends, four to six per cent growth on the initial investments and potential upside in the longer term as the Indian economy starts recovering. For investors willing to hold five years or more, CPSE ETFs tend to reveal their real value.
Volatility is unavoidable—these are equities after all. Energy prices, interest rates, or even global oil shocks ripple through CPSE ETFs. Sector concentration means trouble in power or oil hits harder. And then there is policy risk. A sudden change in disinvestment plans or tax rules can move the ETF overnight. Investors must accept that while government backing provides credibility, it also ties performance to political decisions.
Government policy: Reforms, disinvestment drives, or even delays shape sentiment.
Economic growth: Expanding GDP usually benefits PSUs.
Sector trends: Oil price swings, power demand, or infrastructure push—each matters.
Global events: Inflation, wars, capital flows—all ripple through.
Keeping an eye on both domestic reforms and global developments is crucial.
Investing in CPSE ETFs means buying into India’s public sector story without having to pick individual companies. For some, that is the appeal: stability, dividends, and diversification through one instrument. But it is not for everyone. If your risk appetite is higher and you crave growth, this may feel slow. If you value steady exposure to PSUs and a long-term bet on India’s infrastructure and energy, CPSE ETFs deserve a spot in your portfolio.
The CPSE ETF is not flashy. It does not promise overnight riches. What it offers is something quieter: a simple, affordable way to participate in India’s public sector undertakings. The risks are real—volatility, sector concentration, and policy dependence—but so are the strengths: low costs, government backing, and stable dividends. For investors willing to blend it into a diversified portfolio, CPSE ETFs can play the role of a solid anchor. Not glamorous, but dependable. Sometimes that is exactly what you want in an investment.
Additional Read: What is Nifty
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The CPSE ETF is a government-guaranteed Exchange-Traded Fund that invests in Central Public Sector Enterprises shares, allowing investors to get exposure to public sector companies in one investment.
CPSE ETF aggregates money of the investors to invest in a basket of chosen CPSE shares, following the Nifty CPSE Index, and enables trading on stock exchanges like any ordinary stock.
Advantages include diversification of portfolios, low cost ratio, exposure to stable government-backed businesses, on-time trading flexibility, and possible long-term returns with relatively lower investment risks.
Yes, CPSE ETFs are exposed to market volatility, sectoral risks, and policy changes. Returns can vary on the basis of economic factors, government actions, and individual CPSE performance.
To invest, one needs to open a Demat account, log in to your trading account, find CPSE ETF, enter your desired units, and buy as you do with any listed stock.
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