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India Plotting ETF to Invest in State-Run Companies: Report


India’s government plans to list an ETF that would invest in shares of state-run firms in an effort to raise money by offering stakes in companies it oversees, according to a report this week.

India plans to launch the ETF within the next few months, WSJ.com reports.

“We have floated a draft cabinet note seeking views of different ministries” on the details of the proposal, including on the appointment of an asset management company, a senior Finance Ministry official told The Wall Street Journal.

“Initially, we will have only 15-20 profit-making listed companies in our basket so as to attract investors,” the official said.

The government wants to sell shares in state-run companies to raise funds and address the fiscal deficit, according to the article.

“According to analysts, demand for the units of the proposed ETF would likely be better than that for the shares of individual state-run companies because of the lower risk of investing in a pool of stocks from different sectors,” WSJ.com reported. “Also, investors can trade their ETF units on stock exchanges instead of waiting until the end of the day’s trade to redeem their holdings, which is the case for mutual funds.”

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