Subscription for Bharat 22 EFT is open….
What you should invest in this ETF???
After successful launch of Central Public Sector Enterprises (CPSE) exchange-traded fund (ETF) in May 2014 and two subsequent follow-on offers in February and March 2017 worth roughly Rs11,500 crore, the government is divesting shares of another set of companies. It has appointed ICICI Prudential Asset Management Co. Ltd as the fund manager and the new scheme is Bharat 22 ETF.This ETF is a part of government of India’s overall disinvestment program, announced earlier by the Department of Investment and Public Asset Management. Through the ETF, ICICI Prudential AMC proposed to raise an initial amount of Rs 8,000 crore plus additional amount subject to approval from the Government of India This Fund offer is open on 15 November 2017 and will close on 17 November 2017.
Benchmark for this ETF is BSE Bharat 22 Index.
The S&P BSE Bharat 22 index has been specially created to track the basket’s performance. The index will comprise shares of the 22 companies in Bharat 22 ETF. No individual stock in the index—and thereby Bharat-22 ETF—will be more than 15% of the index and no sector more than 20%.
Why it is better than CPSE -2
Although Bharat-22 ETF is different from CPSE ETF, comparisons are inevitable. Bharat 22 ETF scores over CPSE ETF . First, it is more diversified. CPSE ETF had just 10 stocks. Nearly 60% of CPSE ETF’s holdings are in the energy sector.
Bharat 22 ETF also has three private sector firms—Larsen & Tourbo Ltd, ITC Ltd and Axis Bank Ltd, where the government holds stakes. Bharat 22 ETF’s expense ratio is just 0.0095% every year, for a period of 3 years. After that it can change. CPSE ETF’s expense ratio is 6 basis points. This means, a Rs10,000 investment will result in a cost per year of 0.95 paisa in Bharat 22 ETF. One basis point is one-hundredth of a percentage point.
This is a large-cap fund and has a closer relation to the broader indices than the CPSE ETF mainly on account of the fact that the three largest holdings in B22 ETF are also part of the Nifty/Sensex, so movements in those indices will better reflect in Bharat 22 ETF than in the CPSE ETF.
Thematic fund: In 2016, when S&P BSE Sensex returned 2%, large-cap and multi-cap funds had returned 4.5% and 5.1% respectively, CPSE ETF returned 17.4%. Similar to CPSE ETF, expect bouts of volatility in B22 ETF as both are thematic funds.
If your mutual funds portfolio is adequately diversified, you can look at it. It doesn’t carry a lock-in and capital gains, if any, after 1 year are tax-free. I suggest you hold on for at least 3 years for the government policies to be implemented, especially in sectors that this fund invests in.
To earn the discount of 3%, you need to invest in the NFO period
Listing : This ETF will be listed on NSE & BSE .Listing is expected on 28/29 November 2017.