Bharat 22 ETF

ETF investing is gradually gaining acceptance in India as a Financial instrument with unique advantages. Currently there are 30 Equity ETF’s  Listed on NSE.

 

Bharat 22 ETF is the second ETF of the government of India after CPSE ETF. It is announced as a part of disinvestment program of government.

 

There are 22 stocks under the S&P BSE Bharat 22 Index which comprises shares of Central Public Sector Enterprises (CPSE), Public Sector Banks and some of the strategic holding of Specified Undertaking of Unit Trust of India (SUUTI).

 

Issue date:

Anchor investors: November 14, 2017

Non-anchor investors: November 15 – 17, 2017

 

Well diversified portfolio:

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%.

Sector wise weightage-

• Basic materials-4.4%
• Energy-17.5%
• Finance and banking-20.3%
• FMCG-15.2%
• Industrials-22.6%
• Utilities-20%

 

 

Reasons to invest:

• The Index has a large cap orientation, with sector leaders. The companies have strong fundamentals and will benefit from various govt reforms and initiatives as below.
  • Financial sector reforms – Insolvency  & Bankruptcy code and digital economy
  • Investments in the Infrastucture
  • Make in India
  • Oil & Gas Reforms
  • Power Sector Reforms
• The mix of allocation across sectors is such that it takes into account safe, cyclical, and growth prospects. So, FMCG takes care of the safety net, energy and metals will benefit from cyclical nature of the economy.
• Higher Dividend Yield as compared to Sensex and Nifty 50.
• The Bharat 22 Index will have an annual re-balancing mechanism.
• Stock weighing mechanism – Free Float Market Capitalization which reduces concentration to few heavy weight companies
• The Government has offered a  3% discount to all investors during the NFO on the*Reference market Price of the underlying index shares

*Reference Market Price: Price determined based on the average of full day Volume Weighted Average Price (VWAP) on BSE Ltd. (BSE) during the Non Anchor Investor NFO Period.

 

Comparison with CPSE ETF:

 

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 such as Basic Materials, Energy, Finance, FMCG, and Industrials & Utilities. The concentration risk in Bharat index is significantly low as top 3 stocks account for 40% allocation and top 5 sectors account for 56% allocation, whereas in Nifty CPSE Index it is 70% and 80% respectively.

 

Recommendation:

Investors with a long term horizon should invest in the Bharat 22 ETF. The index constituents comprise of sector leaders and offers good diversification. The constituents are fundamentally very strong & would gain from various government reforms and initiatives.