Should you invest in Bharat 22 ETF

The Bharat 22 ETF is open for subscription today; one day after the issue was opened for Anchor investors. The ETF is expected to raise Rs 8,000 crore for the Government. An ETF pools money from many investors and invest in a basket of stocks reflecting the index and its performance. ETF units will list on the exchanges allowing the investors to trade at the quoted price.

Nov 15, 2017 08:11 IST India Infoline News Service

ETF investment

The Bharat 22 ETF is open for subscription today, a day after the issue was opened for Anchor investors. The ETF is expected to raise Rs 8,000 crore for the Government. An ETF pools money from many investors and invests in a basket of stocks reflecting the index and its performance. ETF units will list on the exchanges allowing the investors to trade at the quoted price.

Bharat 22 ETF will be managed by ICICI Prudential AMC and will mirror S&P BSE Bharat 22 Index. So to understand the ETF we should understand the underlying index i.e. S&P BSE Bharat 22 Index.

Fund Details

Name

Bharat 22 ETF

Benchmark

S&P BSE Bharat 22 Index

NFO begins

November 15, 2017

NFO Ends

November 17, 2017

Expense Ratio

0.0095%

S&P BSE Bharat 22 Index comprises of 22 stocks from CPSE, SUUTI and PSU Banks listed on BSE in which Government targets to reduce its stake. The Bharat 22 Index will be rebalanced annually in March. The index is managed by Asia Index Private Limited.

Unlike NSE CPSE Index which comprises of only 10 PSU companies primarily energy stocks like ONGC, IOCL, Coal India and so on, Bharat 22 Index is more diversified and includes companies from 6 different sectors (Basic Materials, Energy, Finance, FMCG, and Industrials & Utilities). The concentration risk in Bharat Index is also significantly low as top 3 stocks account for ~40% allocation and top 5 sectors account for ~56% allocation, significantly lower than Nifty CPSE Index.

No. of stocks

No. of sectors

% of top 3 stocks

% of top 5 stocks

S&P BSE Bharat 22 Index

22

6

40.9

56.5

Nifty CPSE Index

10

6

70.1

83.5



Besides, the maximum weight of BSE sector and individual stocks are capped at 20% and 15% respectively in S&P BSE Bharat 22 Index.

Sr. No.

Index/Sectors

Free Float Market Capitalization (%)

1

Capital Goods

21.01

2

Oil & Gas

19.64

3

Finance

17.38

4

Power

16.62

5

FMCG

14.5

6

Metal, Metal Products & Mining

9.40

7

Miscellaneous

1.45

Bharat 22 ETF will also invest in private sector companies like Axis Bank, ITC, and L&T which the Government is holding under the Specified Undertaking of Unit Trust of India (SUUTI). Besides, a discount of 3% is offered to all categories of investors including retail individual investors. The expense ratio of the fund is 1 basis point which is the lowest in Indian ETFs.

So, if you want to invest in some top PSUs and blue chip private sector companies, you can consider investing in Bharat 22 ETF. But we recommended you to invest for atleast 3 years since most of the reforms undertaken by the government will take some time to yield the desired results. Besides, there is no capital gain tax after 1 year of holding period since Bharat 22 ETF is an equity fund.


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