To expedite its budgeted disinvestment of Rs 72,500, the government has launched a new Exchange traded fund, Bharat-22. A bouquet of 22 companies, this ETF shall be listed on the stock exchanges. ICICI Prudential shall be the fund manager of the new ETF.
THE OFFERING BY THE GOVERNMENT
A diverse portfolio of six companies constitutes this ETF which includes utilities, energy, finance, FMCG, industrials and basic materials. The composition of this ETF is in accordance with the reforms in each sector and will have direct impact on the share valuation.
|Constituents of the Portfolio|
|Industrials||L&T, Engineers India Ltd, BEL and NBCC (India)|
|Basic Materials||National Aluminium Co Ltd|
|Utilities||GAIL India, Power Grid Corp of India Ltd, NHPC Ltd, NTPC Ltd, NLC India Ltd, and SJVN Ltd|
|Finance||State Bank of India, Bank of Baroda, Axis Bank, REC, PFC and Indian Bank|
|Energy||ONGC, Bharat Petroleum Corp Ltd, IOC and Coal India|
About 90 percent of the equities included in the ETF portfolio are also traded in the futures. In this fiscal year, the government has budgeted to raise Rs 72,500 from the disinvestment in PSUs. So far, it has been able to raise Rs 9,300 crores.
INVESTOR’S TAKE AWAY
Globally ETF assets have grown significantly. Being low cost, less risky and highly liquid, these are preferred by large investors. Bharat-22 is more liquid than mutual funds as it can be traded on stock exchange and so an investor shall have greater flexibility and ease of trade.
The government has offered a slice of Blue Chips which makes ETF more valuable and hedges the risk. Bharat-22 offers great value proposition for those investors who are intending to make long term investments.
In the present financial ecosystem where an investor is loaded with avenues of investment, Bharat-22 holds a distinct advantage. The ETF shall have different trenches based on the market conditions. An investor should be watchful of the trends in six constituent sectors to make investment in this ETF. The valuation of these major sectors would see a dynamic change in the coming times pertaining to factor reforms carried out by the government.