Vinay Rajani of HDFC Sec suggests these 3 ETFs to buy in the near-term

In the backdrop of a volatile equity market and rising global uncertainties, retail and institutional investors alike are increasingly looking toward Exchange Traded Funds (ETFs) as a strategic way to participate in broad market trends with relatively lower risk and cost. Vinay Rajani, Senior Technical and Derivative Analyst at HDFC Securities, has recently recommended three ETFs that he believes present compelling near-term investment opportunities.

These picks are guided by a combination of technical indicators, market sentiment, and macroeconomic positioning. Rajani's suggestions focus on a diversified yet focused investment strategy ideal for investors seeking to ride the broader momentum while mitigating risks linked with individual stock volatility.

The Three ETF Picks by Vinay Rajani

1. CPSE ETF (Central Public Sector Enterprises ETF)
2. PSU Bank ETF
3. Nifty 50 ETF

These ETFs are positioned to benefit from ongoing policy support, valuation comfort, and a favorable technical setup, according to Rajani.

1. CPSE ETF: Riding the Disinvestment and Capex Wave

The CPSE ETF, which comprises a basket of government-owned enterprises, is one of Rajani’s top picks.

“Technically, CPSE ETF has formed a higher bottom on the weekly charts and bounced back smartly from its recent lows. The structure remains positive with strength in PSU sectors driven by the government’s capex plans,” Rajani noted.

This ETF is expected to gain further traction as the central government continues its focus on infrastructure spending and divestment of non-core assets. Over the past year, CPSE constituents like NTPC, PowerGrid, and Coal India have delivered strong returns, aided by dividend yields and earnings growth.

Key Drivers:

• Continued government reforms and monetization of assets.

• Dividend yield attractiveness.

• Increased investor participation in PSU stories.

2. PSU Bank ETF: Banking on Financial Sector Revival

The PSU Bank ETF reflects the performance of listed public sector banks in India. With a resurgence in credit growth, cleaner balance sheets, and improving asset quality, PSU banks have returned to the investor spotlight.

“PSU Bank ETF has broken out of its consolidation range and is showing signs of strength. The breakout above key resistance levels is supported by volume, which is a bullish technical indicator,” said Rajani.

Additionally, improved NPA recovery, recapitalization support, and attractive valuations compared to private banks are working in favor of this segment.

Key Drivers:

• Lending revival and credit demand across sectors.

• Margin expansion and improved earnings visibility.

• Government support for recapitalization and reforms.

3. Nifty 50 ETF: A Safer Bet Amid Global Uncertainty

Rajani also emphasizes the Nifty 50 ETF as a core holding in any equity portfolio, especially during turbulent times.

“It’s prudent for investors to have an anchor in the form of the Nifty 50 ETF. It offers exposure to the top 50 companies and acts as a hedge against individual stock-specific volatility,” he remarked.

The Nifty 50 index, which has been relatively resilient amid global headwinds, is composed of diversified sectors and blue-chip companies that offer a blend of growth and stability.

Key Drivers:

• Broader market exposure.

• Liquidity and ease of trading.

• Resilience in the face of global rate volatility.

ETF Popularity on the Rise in India

According to data from AMFI (Association of Mutual Funds in India), ETFs have witnessed a 27% year-on-year rise in AUM as of June 2025. Retail participation in ETFs has also increased substantially due to ease of investing, low costs, and transparent price discovery.

“ETFs are an efficient vehicle for both passive and tactical allocation. Investors are recognizing their role in risk management and long-term wealth creation,” said Prateek Bansal, fund manager at a leading AMC.

Technical Outlook and Investment Strategy

Rajani recommends that investors adopt a staggered buying strategy for these ETFs rather than lump-sum investments, considering ongoing market volatility.

“From a technical standpoint, all three ETFs have formed bullish patterns like cup-and-handle or ascending triangle formations. These are suggestive of potential upmoves in the near term. However, waiting for minor dips or consolidations could offer better entry points,” he added.

For short- to medium-term traders, Rajani suggests using stop-loss and trailing strategies to protect gains.

Investor Outlook: Balanced, Tactical, and Informed

With macroeconomic headwinds like sticky inflation, uncertain Fed rate trajectory, and upcoming domestic elections, the Indian markets may witness heightened volatility in H2CY25. ETFs, especially those aligned with broader themes and government-backed sectors, present an attractive proposition for both new and seasoned investors.

These ETF ideas from HDFC Securities offer a diversified, thematic, and relatively lower-risk way to stay invested in the markets, especially during transitional phases.

As Rajani concludes, “ETFs are not just for passive investors anymore—they are fast becoming active choices in a well-calibrated investment portfolio.”