Bharat 22 ETF : What it is ? | Exchange Trading Funds | Explore now !

  • 12 December 2017 | 1691 Views | By Mint2Save
Bharat 22 ETF

Trading like a stock, yet having diversification quality of a portfolio, Exchange Traded Funds or ETFs represent a perfect combination of equity and a mutual fund. As far as the Indian scenario is concerned, ETF market is well developing and has some key players actively utilising this investment tool.

Recently, the ETF market has caught fire like attention due to launch of the awaited Bharat 22 ETF. This fund has been floated by the Goverment of India and has seen some huge subscriptions too. Soon planning to go global, Bharat 22 ETF seems to be a long term performer and wealth creator. Let’s learn more about this ETF in this article.

INTRODUCTION TO ETF

To get an insight into Bharat 22 ETF let us first understand the meaning of an ETF.

An exchange-traded fund (ETF), is a marketable security that tracks an index like NASDAQ-100 Index, S&P 500, Dow Jones, etc, commodity, bonds, or a basket of assets like an index fund. An ETF trades like an equity stock on a stock exchange. They experience price changes throughout the day as they are bought and sold in the market. The main difference between ETFs and other types of index funds is that ETFs don’t try to outperform their corresponding index, but simply replicate its performance. They don’t try to beat the market, they try to be the market.

ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. ETFs are advantageous for investors as they combine the range of a diversified portfolio with the simplicity of trading a single stock. Investors can purchase ETF shares on margin, short sell shares, or hold for the long term.

ALL ABOUT BHARAT 22 ETF

Now, coming to Bharat 22 ETF, the Government of India, in the Budget speech of 2017, announced a target to achieve a divestment of Rs.72,500 crore in the FY 2017-18, Bharat 22 ETF has been set up as one of its vehicle to achieve this target. The ETF aims to bring Rs 8,000 crore to the government. The responsibility to manage the fund was given to ICICI Prudential Mutual Fund.

As the name suggests “Bharat 22 ETF”, this fund shall invest in equity securities of the underlying constituent companies of “S&P BSE Bharat 22 Index”, which is also the Benchmark Index of the ETF. It is a exclusive blend of shares of key Central Public Sector Enterprises (CPSEs), public sector banks (PSBs) and also the government-owned shares in blue chip private companies like Larsen & Toubro (L&T), Axis Bank, Power Grid, ITC etc.

S&P BSE Bharat 22 Index is well diversified index across six sectors. The stock level capping is at 15% and sector capping is at 20%. The breakup of S&P BSE Bharat 22 Index includes:

Company Name Basic Industry Weight (%)
National Aluminium Basic Materials 5.13
Total – Basic Materials (%) 5.13
Oil and Natural Gas Corp Energy 5.54
Indian Oil Corp Energy 5
Bharat Petroleum Corp Energy 4.54
Coal India Energy 3.72
Total – Energy (%) 18.00
State Bank of India Finance 7.25
Axis Bank Finance 7.82
Bank of Baroda Finance 1.22
Rural Electrification Corp Finance 1.18
Power Finance Corp Finance 0.99
Indian Bank Finance 0.21
Total – Finance (%) 18.67
ITC FMCG 14.26
Total – FMCG (%) 14.26
Larsen and Tourbo Industrials 16.92
Bharat Electronics Industrials 3.48
Engineers India Industrials 1.44
NBCC (India) Industrials 0.68
Total – Industrials (%) 22.52
Power Grid Corp of India Utilities 7.73
NTPC Utilities 7.07
GAIL India Utilities 4.25
NHPC Utilities 1.08
NLC India Utilities 0.27
SJVN Utilities 0.23
Total – Utilities (%) 20.63


It is listed on both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The New Fund Offer period of Bharat 22 ETF for Anchor Investor opened and closed on November 14, 2017 and for Non Anchor Investor opened on November 15, 2017 and closed on November 17, 2017. The symbol for Bharat 22 ETF on BSE is
BHARATIWIN. This New Fund Offer had been over subscribed by four times, following which it had raised the issue size to Rs 14,500 crore.

The issue received highest subscription for any new fund offer (NFO) in the history of Indian mutual fund industry.

TAX IMPLICATIONS ON THE INVESTORS

The tax treatment for Bharat 22 ETF is similar to other equity mutual fund schemes. Short-term capital gains (STCG) (STT paid), that is, gains if the investment is held up to for less than twelve months is taxed at 15% plus surcharge and cess as applicable. Long-term capital gains (LTCG), that is, gains if the investment is held for more than twelve months are exempt from tax under section 10(38) of the Income tax Act 1961. Short term capital loss (STCG) can be set off against other Short term capital gains or long term capital gains and Long term capital loss (LTCL) is a dead loss having no tax treatment or benefit.

BENEFITS OF INVESTING IN BHARAT 22 ETF

  • Bharat 22 ETF provides an attractive investment opportunity as it provides investors an opportunity to invest in large cap PSUs and other companies with government holdings and several of these companies forming part of the ETF are market leaders in their area of operations. Companies forming part of the index are fundamentally strong with many among them being market leaders and enjoying healthy market shares. Hence these are high dividend yielding companies that are available at reasonable valuations.
  • It also gives the investor an opportunity for diversification as the Bharat 22 Index has 22 stocks from 6 sectors, viz. Industrials, Finance, FMCG, Utilities, Energy and Basic Materials. Hence it offers investor a diversified portfolio.
  • Another benefit is that the government has offered a 3 percent discount to NFO investors, which is an additional incentive to invest in the Bharat 22 ETF.
  • Bharat 22 ETF is available for relatively lower cost as compared to actively managed mutual fund schemes and can be traded at real-time NAV (net asset value).
  • Comparing this ETF on market matrices such as price-to-earnings ratio and dividend yield, the ETF stacks up well. Analysis of the one-year rolling dividend yield of the Bharat 22 compared with the Sensex and the Nifty since March 2013 shows that Bharat 22 index has consistently generated higher dividend yield, almost double than the market benchmarks.
  • On the earnings growth (FY17-19) front as well, Bharat 22 ETF companies are better placed at 16 percent, compared with the Sensex at 14 percent and the Nifty at 13 percent.

Hence, Bharat 22 ETF is a satisfactory investment option for investors who are looking for long-term investment opportunities and want to reap better returns from the stock market without having to buy different shares directly.

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