Bharat 22 ETF: Should you Invest?

Should you Invest in Bharat 22 ETF?

Should you Invest in Bharat 22 ETF?

The government of India has announced the launch of Bharat 22 ETF or Exchange Traded Fund. This ETF would constitute of 22 companies (and hence the name) including central PSUs, government banks and some holdings of the government’s investment arm SUUTI. This is the second ETF from Government after CPSE ETF which was first launched in April 2014 and subsequently had many FPOs.

For those of you new to the concept of ETF, this is a type of mutual fund which invests/tracks an index and is traded on stock market just like any other stocks/shares. Unlike regular mutual funds you need Demat account to trade in ETFs.

Why government has launched Bharat 22 ETF?

Every financial year government has targets of divestment i.e. it has to sell part of its holding in Central public sector units. This brings in money to the government to be used for more beneficial/welfare purpose and also forces the PSUs to be more accountable to its shareholders. The experience of divesting through CPSE ETF has been smart and efficient for government leading to the launch of second ETF – Bharat 22.

The timing is also conducive as the stock markets are trading at life time highs and sentiments are quite positive, this would help government to easily sell the ETF.

Also Read: 13 Investments to Generate Regular Income

Stocks part of Bharat 22

L&T and ITC have the highest weightage in Bharat 22 index at 32.3%. While in terms of Sectors Industrials has weightage of 22.5% followed by Finance & Utilities at 20% each.

The table below gives you the stocks part of Bharat 22 index.

Company Sector Ownership Weight (%)
Larsen & Toubro Industrials Private 17.10%
ITC FMCG Private 15.20%
State Bank of India Finance Government 8.60%
Power Grid Corporation of India Utilities Government 7.90%
Axis Bank Finance Private 7.70%
NTPC Utilities Government 6.70%
ONGC Energy Government 5.30%
National Aluminium Metals Government 4.40%
Indian Oil Corporation Energy Government 4.40%
BPCL Energy Government 4.40%
Gail India Utilities Government 3.70%
Coal India Energy Government 3.30%
Bharat Electronics Industrials Government 3.30%
Engineers India Industrials Government 1.50%
Bank of Baroda Finance Government 1.40%
Rural Electrification Corporation Finance Government 1.30%
NHPC Utilities Government 1.20%
Power Finance Corporation Finance Government 1.00%
NBCC (India) Ltd Industrials Government 0.60%
NLC India Utilities Government 0.30%
Indian Bank Finance Government 0.20%
SJVN Utilities Government 0.20%

Also Read: Which is the Best day for SIP in Mutual Fund?

How to Subscribe to Bharat 22 ETF?

ICICI Prudential AMC is the ETF manager for the fund and Asia Index Private Limited (a joint venture between BSE and S&P Global) would be the index provider. The index will be balanced annually. The dates for Bharat 22 IPO has still not been announced but is expected to be launched soon. You can subscribe in the same manner as you do for any IPO through ASBA. On listing you can buy as you buy any other other stock!

Also Read: How to apply for IPO using ASBA?

Retail investors might expect to get some discount (may be 5%) as has been the case for CPSE ETF.

Should you Invest in in Bharat 22 ETF?

Bharat 22 has three privately managed blue chips – L&T, ITC and Axis Bank which together have weightage of 40%. Rest 60% of index is public sector units. Invest if you trust PSUs to outperform the broader market. Else you can always invest in ETFs which track NIFTY, SENSEX or the regular mutual funds. Remember the performance of CPSE ETF may not be repeated as it was launched when the markets were subdued while Bharat 22 launch would happen at market peaks!

Also Read: Why Investing in Mutual Fund NFOs is Bad Idea?

We will revisit this when the actual IPO is announced and any discounts offered to retail investors.

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