Is it true that there is a surge in demand for the CPSE ETFs from high net worth investors in India?

You are absolutely correct that there has been a surge in the interest in CPSE ETFs in the last few months. In fact, you must be aware that CPSE ETFs are the instrument used by the government to divest PSUs in a strategic manner and they offer a portfolio of PSU stocks.

According to date from the markets and the broker reports, there has suddenly been a surge of interest from the HNI segment for these ETF units of PSUs. As per NSE data, the average volumes on the NSE have jumped to 14.7 million units in the latest week compared to an average volume of just about 3.3 million units in the past. That is significant.

The reasons are fairly straight forward and not too hard to fathom. Cheap valuations of PSU stocks have combined with extremely attractive dividend yields on these PSU stocks making the ETFs doubly attractive. That possibly explains the demand surge.

In addition, the low returns on bank deposits and extremely low expense ratios of these CPSE ETFs are making a case for investing in these instruments; both in pre-tax and post-tax terms. In most cases, dividend yield on the CPSE ETF is much higher than bank deposit yields. That is apparently attracting a lot of HNIs to this product.