BAJAJ BROKING
July 01, 2025
4 mins read
The stock market has various indices, and the Nifty is one of the popular indices. Nifty CPSE index is one of the different types of Nifty indices. The NIFTY CPSE index tracks the performance of select Central Public Sector Enterprises (CPSEs) in India. The index comprises the top 12 CPSE stocks, which are listed as Maharatnas, Navratnas, and Miniratnas.
These are government-owned and operated companies and have a very strong strategic importance. These companies operate in industries such as power, oil, and gas. Some of the prominent companies in the Nifty CPSE include NTPC, ONGC, and Power Grid Corporation of India, among others. The index is used as a benchmark to evaluate the performance of public sector enterprises in India.
As a trader, it is essential for you to understand key indices like the Nifty CPSE. So, read on as we discuss what is Nifty CPSE, its advantages, potential risks, and what the future may hold for Nifty CPSE.
NIFTY CPSE Index was launched with a view to supporting disinvestment in specific Central Public Sector Enterprises (CPSEs) by the Government of India. The index was launched as a measure to develop a diversified portfolio of government-owned firms with strong fundamentals, allowing investors to participate in the growth of key sectors led by public businesses.
The stocks in the index are selected based on free-float market capitalisation and comprise only those Central Public Sector Enterprises (CPSEs) that belong to the categories of Maharatnas, Navratnas, and Miniratnas and are listed and actively traded on stock exchanges.
In the past, the index has also been used as one of the principal tools of the government to raise funds through disinvestment by launching Exchange Traded Funds (ETFs) that track the NIFTY CPSE Index. These ETFs have also attracted both retail and institutional investors, providing them with the option to invest in some of India's large-scale state-owned enterprises.
The makeup of the index over time has shifted to accommodate changes in market capitalisation as well as the role of CPSEs in India's economy. The index is reviewed every six months to ensure it remains aligned with market trends. It has emerged as a key reference point for assessing the performance of the public sector and an integral part of India's capital market architecture.
The Nifty CPSE is calculated using the free-float market capitalisation methodology. This approach reflects the total market value of a company’s freely traded shares, excluding shares held by promoters. The table below explains the key components and steps involved in calculating the Nifty CPSE Index value.
Component | Explanation |
Stock Price | Current market price of each stock in the Nifty CPSE Index. |
Free-Float Shares | Only includes shares available for public trading; excludes government/promoter holdings. |
Free-Float Market Capitalisation | Stock Price × Free-Float Shares for each company. |
Total Free-Float Market Capitalisation | Sum of free-float market caps of all 12 index constituents. |
Index Divisor | A fixed number used to normalise the index value and maintain continuity after corporate actions. |
Index Formula | Index Value = (Σ (Price × Free-Float Shares)) / Index Divisor |
Corporate Actions | The divisor is adjusted for events like splits, bonuses, and rights issues to keep the index consistent. |
Rebalancing | The index is rebalanced semi-annually to include top CPSEs based on updated market capitalisation. |
Government Policies: The performance of Nifty CPSE stocks is strongly driven by government policies, including disinvestment, subsidies, taxation, and sectoral reforms. A change in policy can directly affect profitability and sentiment.
Several CPSEs are based in industries such as oil, gas, and power. Movements in global commodity prices, particularly crude oil and coal, can have a huge impact on their revenues.
Economic growth, inflation, interest rates, and fiscal deficit influence CPSE operations and investor mood. A slowdown in the economy can lower demand for utilities and commodities.
Environmental regulations, pricing controls, and licensing provisions can significantly impact the cost of operations and revenue generation, particularly in industries such as power and energy.
CPSEs are renowned for providing stable and frequently high dividend payouts, which support their share prices during turbulent times.
Geopolitics and global trade relations influence export-oriented CPSEs and cross-border supply chain CPSEs.
Public perception of the governing government and its economic policies comes into play, particularly ahead of elections or significant policy declarations.
Notwithstanding its government ownership, performance depends on corporate management, leadership, and execution skills.
Some of the striking advantages for those investing in Nifty CPSE Stocks are:
CPSEs have a reputation for paying regular and healthy dividends, making them more attractive to income investors.
State ownership tends to offer a safeguard, particularly in times of economic slowdown or financial turmoil, promising long-term operational stability.
The investors receive exposure to fundamental sectors such as energy, power, and infrastructure, which are crucial to India's economic growth and are less susceptible to obsolescence.
CPSE shares are less volatile as they are supported by the government and are essential businesses.
Typically, CPSEs come at more reasonable valuations relative to private peers, and hence, there is room for value investment.
The government's constant disinvestment initiatives can release shareholder value and enhance operational efficiency, ultimately benefiting investors.
CPSEs provide diversification for portfolios dominated by private sector or technology stocks.
With the expansion of infrastructure and energy requirements, CPSEs are expected to experience higher demand and capital flows, enhancing long-term opportunities.
CPSE ETFs provide easy access to a diverse portfolio of government-owned enterprises to passive investors.
NIFTY CPSE may also have certain limitations. These are:
Decisions on operations can be driven by political agendas rather than profitability, which can impact efficiency and returns.
Red tape and bureaucratic speed bumps can hinder growth and responsiveness to changing market conditions.
The Nifty CPSE Index is concentrated in the oil, gas, and power sectors, which makes the investor vulnerable to sector-specific slumps.
Although divestment can release value, delays or missing targets can reduce stock sentiment and pricing.
Abrupt policy changes, particularly those affecting prices or environmental policies, can negatively impact revenues and costs.
In comparison to private sector counterparts, several CPSEs have lower investment in innovation and modernisation, which could constrain their growth.
Historically, some CPSEs have underperformed general industry indices due to inefficiencies and the inefficient use of capital.
Commodities-based CPSEs are sensitive to global price moves, particularly in crude oil and coal.
Excessive dependence on dividends for attractiveness can be a constraint during times of low profitability.
Investing in the shares of Nifty CPSE can be done in two primary methods: direct investment in shares or by using Exchange Traded Funds (ETFs). To make a direct investment, investors have to open a demat and trading account with a listed stockbroker.
They may then purchase the listed CPSE shares, such as ONGC, NTPC, and Power Grid, which are included in the Nifty CPSE Index, individually. This strategy enables investors to tailor their portfolio according to risk tolerance, stock performance, and industry outlook.
Another easy option is to invest in ETFs that track the Nifty CPSE Index. These ETFs provide diversified exposure to all 12 index members in proportion to their weightage in the index. They are listed on leading stock exchanges and can be purchased and sold like ordinary stocks.
CPSE ETFs have become popular due to their relatively low expenses, simplicity of access, and the government's disinvestment policy, which sometimes involves offers for individual investors at discounted prices.
Mutual fund houses can also provide index funds or sectoral funds that invest in public sector undertakings, providing indirect exposure to Nifty CPSE themes. When investing, market timing, sector concentration, and macroeconomic considerations should be taken into account. Monitoring government policies and future disinvestment intentions can further aid in making informed investment decisions in CPSE stocks.
Investing in Nifty CPSE or ETFs involves two main tax aspects: capital gains and dividends.
Short-Term Capital Gains (STCG): If sold within 12 months, gains are now taxed at a rate of 20%.
Long-Term Capital Gains (LTCG): For investments held beyond a year, gains exceeding ₹ 1.25 lakh are taxed at 12.5% without the indexation benefit.
Dividends from CPSE shares or ETFs are taxable as per your individual income slab. These will be reported (TDS may apply if exceeding thresholds) and added to taxable income.
Investing in CPSE-focused ETFs also offers tax benefits: they qualify for deduction under Section 80C up to ₹ 1.5 lakh, with a mandatory three-year lock-in, similar to ELSS investments.
The Securities Transaction Tax (STT) paid during a trade is part of your transaction cost and is not deductible. Maintain proper records, prices, dates, and holding period to compute gains and losses for filing accurately.
Using approaches like tax-loss harvesting and timing sales can optimise after-tax returns. Always factor in the holding period, STCG vs. LTCG rules, and your individual tax bracket when making decisions.
The prospects for the Nifty CPSE are favourable but largely contingent upon government policy, global economic forces, and sectoral reforms. With continued investment in infrastructure, energy, and industrial growth, CPSEs, especially in power, oil & gas, and logistics, are expected to continue playing a pivotal role in national growth initiatives. The continuation of the disinvestment program by the government aims to enhance the transparency, efficiency, and competitiveness of public sector units, which can improve investor sentiment and market performance.
With proposals to privatise some CPSEs and reduce fiscal costs, the performance of these entities would improve if they adopt private-sector efficiencies and corporate governance practices. This change can enhance shareholder value, thereby increasing the attractiveness of the CPSE segment to long-term investors.
Furthermore, the increasing demand for energy, digital infrastructure, and public utility services will continue to make many CPSEs integral to India's economy. The adoption of ESG standards and sustainability reporting can also impact the investment attractiveness of CPSEs in international markets.
However, the future will also depend on how these enterprises address modernisation, innovation, and competition. The Nifty CPSE Index may become a more diversified and robust benchmark if structural reforms and operational enhancements are implemented over the next few years.
The Nifty CPSE Index is India's best-performing index of public sector enterprises, providing investors with exposure to strategically important industries such as power and oil and gas. With high government support, stable dividends, and long-term growth prospects, CPSE stocks are good for conservative investors.
Political interference and sector concentration are threats, though. With reforms and disinvestment on the cards, the relevance and investor appeal of the index are likely to increase, making it a key part of India's evolving equity landscape and a desirable investment opportunity.
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Nifty CPSE stocks are shares of top-performing Central Public Sector Enterprises selected based on free-float market capitalisation from Maharatnas, Navratnas, and Miniratnas, listed in the Nifty CPSE Index.
Some of the popular Nifty CPSE stocks include Power Grid Corporation, NTPC, ONGC, Bharat Electronics, and Coal India, known for stable performance, strong dividends, and strategic importance in India’s economy.
The objective of Nifty CPSE is to track the performance of select public sector enterprises and facilitate government disinvestment through ETFs, while offering investors exposure to government-backed businesses.
Nifty CPSE works by tracking the market performance of 12 select CPSE stocks using free-float market capitalisation, with periodic rebalancing to ensure accurate sector representation and index relevance.
The Nifty CPSE Index is managed and maintained by NSE Indices Limited, a subsidiary of the National Stock Exchange (NSE), which is responsible for index methodology, rebalancing, and constituent selection.
The Nifty CPSE Index was launched in 2014, making it over 10 years old as of 2025. It was created to support the Indian government’s disinvestment strategy through CPSE-based investment options.
You can invest in Nifty CPSE stocks by buying individual CPSE shares or investing in CPSE Exchange Traded Funds (ETFs) through a demat and trading account with a stockbroker.
The Nifty CPSE Index consists of 12 Central Public Sector Enterprises that are listed and selected based on their free-float market capitalisation and trading activity on Indian stock exchanges.
Stocks are chosen based on free-float market capitalisation from eligible Maharatnas, Navratnas, and Miniratnas, with active trading history and government holding of more than 51% equity.
Yes, Nifty CPSE ETFs or constituent stocks can be bought today and sold tomorrow, depending on market liquidity, brokerage rules, and intraday trading availability in your trading account.
Yes, investing in Nifty CPSE can be beneficial for stable dividends and long-term growth, but sector concentration and political influence require careful analysis and alignment with investment goals.
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