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Bharat-22 exchange traded fund (ETF)

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By IE&M Research

The government has launched a new ETF under the name Bharat 22, which will comprise shares of 22 bluechip stocks, primarily to help it to sell its equity stakes in state run firms and also achieve its objective to raise ` 72,500 crore through disinvestment in FY18. However, the product is good for investors who have a long term horizon while investing. The government did not formally announce the date of the launch of ETF.

The stocks are spread across 6 sectors. The ETF will have a single company cap of 15 per cent, while the sectoral cap has been pegged at 22 per cent. Top PSUs stocks which are part of the Bharat 22 index include names like ONGC, IOC, BPCL, Coal India, SBI, National Aluminium Company, Axis Bank, Bank of Baroda, REC, Power Finance Corp., Indian Bank, ITC, L&T, Bharat Electricals, EIL, NBCC, Gail India, NHPC, NLC India, SJVN, Power Grid and NTPC.he government has launched a new ETF under the name Bharat 22, which will comprise shares of 22 bluechip stocks, primarily to help it to sell its equity stakes in state run firms and also achieve its objective to raise ` 72,500 crore through disinvestment in FY18. However, the product is good for investors who have a long term horizon while investing. The government did not formally announce the date of the launch of ETF.

It would be the second ETF launched by the government. The first was launched in March 2014 which has outperformed the index by a wide margin. It was up over almost 22 percent in the past one year, more than the near-18 percent rise in the Nifty50 index, and 17% which is the average of top 3 ETF linked to the index.

The Finance Minister said Bharat-22 ETF would comprise 22 companies and will have a diversified portfolio consisting of Central Public Sector Enterprise (CPSE), Public Sector Banks (PSBs) and will also have some strategic holding in the Specified Undertaking of the Unit Trust of India (SUUTI). The ETF will be a portfolio of six sectors – finance, FMCG, basic materials, energy, as well as industrial and utilities. There will be a sectoral capping of 20 percent and a single company stock cap of 15 percent.

ICICI Prudential AMC will be the ETF Manager and Asia Index Private Ltd (JV BSE and S& P Global) will be the Index Provider.

On all parameters Bharat-22 would be better than other ETFs which are linked to index, sector or less diversified given its better diversity. Its fairly diversified products represent the performance of India and Government’s agenda over the long-term. These companies are fundamentally sound and may perform well with the improvement in the economy.

PSUs were less active historically, but their inherent profile is changed after the Modi-led government came to power. A great deal is due to the transparency it has brought with various initiatives. They need to be re-rated. A perception is in the air that state-run public sector companies offer value for money to investors.

ETFs or exchange traded funds are similar to mutual funds wherein investors can purchase units, the value of which will depend on the rise and fall in line with the performance of 22 stocks.

Top PSUs stocks which are part of the Bharat 22 index

ONGC, IOC, BPCL, Coal India, SBI, National Aluminium Company, Axis Bank, Bank of Baroda, REC, Power Finance Corp., Indian Bank, ITC, L&T, Bharat Electricals, EIL, NBCC, Gail India, NHPC, NLC India, SJVN, Power Grid and NTPC.

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