Bharat 22 ETF (exchange-traded fund) NFO (new fund offering) opened to retail investors on Wednesday for a subscription. A discount of 3% is offered on the “Reference Market Price” of the underlying index shares of Bharat 22 ETF to all categories of investors at the time of subscription by the Government of India. Bombay Stock Exchange launched S&P BSE Bharat 22 index on 10 August 2017 — the benchmark index through which the performance of the fund can be tracked. As on 14 November 2017, Bharat 22 had a full market capitalisation of 22.04 lakh crore, a P/E multiple of 19.51; P/BV ratio of 2.09 a dividend yield ratio of 2.26.
Take a look at 11 key things to know with regard to investment in Bharat 22 ETF
How to apply for Bharat 22 ETF
Bharat 22 will be listed on BSE and NSE. One can invest in Bharat 22 just the way one buys a mutual fund. During new fund offer (NFO) bids can be executed through the AMC ICICI Prudential or through brokers. While during ongoing offer period or additional offering period the bids can be placed through AMC in multiples of creation unit size or through stock exchange in multiples of one unit.
Bharat 22 ETF NFO (new fund offer) anchor investors subscription window which opened for one day closed on 14 November 2017. The fund is available to the non-anchor category for subscription from 15 to 17 November 2017. In the non-anchor category, RII (retail individual investors) can bid for a minimum of Rs 5,000 and in multiple of Re 1 up to Rs 2 lakhs while RFs (retirement funds), QIBs (qualified institutional buyers) and NIIs (non-institutional investors) can bid for a minimum of Rs 2,00,001 respectively and in multiples of Re 1.
How units will be allotted
After the completion of the bidding process, the units will be allotted to the respective investor classes. For anchor investors 25% of the maximum amount to be raised by BHARAT 22 ETF will be allotted. Also for the respective sub-categories under the non-anchor portion such as RIIs, QIBs, RFs 25% of the maximum amount will be allotted.
ICICI Prudential is the fund manager for Bharat-22. The ETF includes selected companies from the private sector having an exposure to the extent of 39% while the rest are public sector firms.The CPSE ETF is managed by Reliance Nippon Life. 90% of the equities included are traded in futures.
Bharat 22 ETF is available for relatively lower cost as compared to actively managed mutual fund schemes and can be traded at real-time NAV (net asset value). The portfolio of the underlying asset of Bharat 22 ETF — S&P BSE Bharat 22 index — being decently diversified will be rebalanced annually in March and any additions and deletions will be done as per Government of India notification.
The S&P BSE Bharat 22 Index
The S&P BSE Bharat 22 Index is designed to measure the performance of select companies disinvested by the Central Government of India according to the disinvestment program. The weight of respective stocks is calculated on the basis of free float market capitalisation weighting method.
What is ETF?
ETF is a tradable security, which is essentially a basket of other securities such as either stocks, commodities, or even an index. ETF trading happens on a stock exchange in form of tradable stock. ETF investments are usually cheaper than active mutual fund investments since most ETFs track a specific index and thus have lower operating expenses. ETF’s experience price changes throughout the day as they are bought and sold.
Bharat 22 — Equity ETF
Equity ETF is a basket of stocks that reflects the composition of an Index, like S&P BSE SENSEX index. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. ETFs are is as same as a Mutual Fund which you can buy and sell in real-time at a price that changes throughout the day. Currently, there are eleven equity ETF’s which can be traded on BSE.
ETFs vs Futures
Even though ETFs and Futures both have underlying assets and allow investors exposure to an index but ETF’s are different in many regards from a Future contract. While Futures is a derivative product traded in the F&O segment of stock exchange while ETFs are a cash market product and trade in the capital market segment. Most importantly, the maximum tenure available for futures is just 3 months while ETFs can be held for as long as the investor desires.
Good opportunity for retail 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. ETFs are a relatively safer long-term investment avenue as they can spread their risk across quality companies. Even fund managers with long-term term savings funds prefer ETFs. 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 Mr Mayuresh Joshi, Fund Manager, Angel Broking.
First ETF in India
The first ETF in India was “Nifty BeEs”. Nifty BeEs was launched in January 2002 by Benchmark Mutual Fund and is based on Nifty 50. Its symbol on NSE is “NIFTYBEES”.