Bharat 22 ETF:
As of now all the Mutual Fund investors must have known or be informed that The Govt. Of India’s dream divestment(conferring its stake to others) project of Central PSEs in the form of ” BHARAT 22 ETF ” has come to an end on 17.11.2017. Which was available for Non Individual investors only for 14th November 2017 and 15th to 17th November 2017 for retail investors only. This NFO is expected to be oversubscribed for 2-5 times than its initial offer for 8500 Cr.
Now, we must know what is ETF or Exchange Traded Fund. As the term itself suggests that unlike a Mutual Fund an ETF is traded in Stock exchanges. Exchange Traded Funds (ETF) is defined as a security that tracks an index, a commodity or a basket of assets like an index fund but trades like a stock on an exchange and the price of the fund changes throughout the day as it is bought and sold.
The great benefit of ETF is that it is very transparent regarding its underlying assets and is very low cost even compared to Mutual Funds since it is not required to be actively managed like other instruments due to its inherent nature of tracking a particular index only or underlying basket of assets,which is S&P BSE BHARAT 22 index for this case.
Salient Features of ” BHARAT 22 ETF ” :
First of all this ETF is being offered at 3% discount by G.O.I for NFO only. Which enriches its attractiveness in return perspectives.
It will primarily invest in 22 Blue chip stocks of Central Public Sector Enterprises(CPSEs) and out of which 16 stocks belong to the categories of Maharatna, Miniratna and Navaratna .This ETF has a large-cap oriented composition (nearly 92 per cent), while the remaining are in quality mid-cap companies.The ETF is well diversified across six sectors — industrials, energy, utilities, finance, fast-moving consumer goods and basic materials. Also there are 3 private sector companies like Axis Bank,L&T and ITC, which the GOI holds a stake due to its legacy system of UTI. The maximum investment in a particular stock is restricted to 15% and for a particular sector is 20%.Every year in march there will be a portfolio re balancing and might be a scope of profit booking if so needed. The portfolio composition is given below .
Now the big question is should you invest in this ETF. Many experts have said a “YES” on the other hand many experts said a “NO”. The reasons they provided for not investing is that they feel that this ETF would function like a Thematic fund and there is limited scope of out performance. But with my understanding and preference I would personally go for investing in this ETF considering key factors like very low expense ration of 0.0095% for first 3 years ,3% discount for initial offering or NFO subscription,diversification across various 6 sectors, best blue chip companies of the country and also last but not the least Govt. of India’s recent initiatives towards rapid sustainable growth within 2020 or mission 2020.Also, I would suggest here that don’t invest here keeping in front of your emotions only.If you are comfortable in remaining invested for say more than 5-10 years, then only there is a probability that you may earn a superior returns and be a part of this long term growth opportunity.