Bharat-22 ETF good investment option with better returns, says Angel Broking Fund Manager

Bharat-22 ETF opened today for anchor investors and was announced in the FY18 budget as a part of the government's disinvestment plan.

Photo of Mayuresh Joshi, Fund Manager, Angel Broking. Image Source: Angel Broking

Key Highlights

Bharat 22 ETF opened today till November 17 for anchor investment.

Initial issue size for the ETF is Rs 80,000 crore.

A discount of 3% has been offered to all investors.

Bharat 22 Exchange Traded Fund (ETF) which was launched by Union Finance Minister in August this year has now been opened to investors.

The ETF is a part of the government's disinvestment programme, comprising of 22 companies with a 'finance' component. It will remain open to investment till November 17.

"The composition of Bharat 22 ETF is such that only large cap, dividend paying companies are available. There is a good chance that the government could offer a discount to retail investors like it did during the new fund offer and follow-on offer of CPSE ETF. Hence, Bharat 22 is a good investment option for individual investors who want to make a long-term investment and reap better returns from the stock market without buying shares directly,” said Mayuresh Joshi, Fund Manager, Angel Broking.

An ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange.

The initial issue size for the ETF is Rs 80,000 crore and a discount of 3% has been offered to all investors.

“The ETF - Bharat 22 is an interesting composition of mostly profit-making, dividend paying public sector companies and some shares of blue-chip companies like ITC, Larsen & Toubro, GAIL, ONGC, NALCO, BOB, Axis Bank held under the Special Undertaking of Unit Trust of India or SUUTI. The ETF is a diverse mix of companies within the energy, financials, FMCG and Utilities space and though some of the individual components within the ETF might be having some softness in reported numbers, the basket looks spread out across industries thus reducing a sector/stock risk," Joshi added.

No sector on the index has more than a 20% weightage on the Bharat 22-ETF. A stock capping of 15% is also placed on the index.

The finance sector included companies like - State Bank of India, Axis Bank, Bank of Baroda, Rural Electrification Corporation, Power Finance Corp and Indian Bank.

FMCG companies namely, ITC, Bharat Electronics, Engineers India and NBCC formed 22.6% share.

Globally there were $4 trillion worth Assets Under Management (AUM) which were expected to touch $7 trillion by 2021.

"ETFs are a relatively safer long term investment avenue as they can spread their risk across quality companies. Even fund managers of long-term term savings funds prefer ETFs, hence, there is no reason for individual investors to stay away from it," Joshi said.