The first tranche of BHARAT Bond ETF was launched in December 2019 which had raised nearly Rs 12,400 crore of funds from the investors.
BHARAT Bond ETF: Edelweiss Asset Management has announced the launch of the 2nd tranche of BHARAT Bond ETF in July. The second tranche will comprise of two new Bharat Bond ETF series with maturities of April 2025 and April 2031. The ETF will invest in constituents of the NIFTY BHARAT Bond Indices, consisting of AAA-rated public sector companies. BHARAT Bond Funds of Funds (FOF) with similar maturities will also be there for investors, who do not have Demat accounts.
The BHARAT Bond ETF program is an initiative of the Government of India, from the Department of Investment and Public Asset Management and the latter has given the mandate to Edelweiss AMC to design and manage the product. Through the launch of these two new ETF series, Edelweiss Mutual Fund proposes to raise an initial amount of Rs. 3,000 crore with a green shoe option of Rs. 11,000 crore based on market demand.
The first tranche of BHARAT Bond ETF was launched in December 2019 which had raised nearly Rs 12,400 crore of funds from the investors. According to the AMC, the aim is to create a ladder of BHARAT Bond ETFs across various maturities on the yield curve. This will provide more options for investors to match their investment needs with different time horizons.
Post the listing of the units, according to the AMC, the Bid-Ask spread (the difference between the buy and sell quotes) has stayed in a narrow range of 5 to 10 Bps and the daily average traded value in these ETFs has been between Rs. 3 to 3.5 crore, making it one of the more liquid ETFs in India.
Being an ETF, the buying and selling of the units of Bharat Bond ETF is possible during trading hours on the stock exchange. And, with underlying assets being bonds, Bharat Bond ETF will represent the debt-asset class. Importantly, there will not be any investment in equities or equity-related investments in the BHARAT Bond ETF.
The BHARAT Bond ETF will comprise of bonds issued mostly by central public sector units, but bonds of other government organizations may also be part of the basket of bonds. To start with, only AAA bonds will be part of the ETF basket which means at a later stage, bonds with lower ratings may also be added to the list. As an investor, keeping track of the portfolio may, therefore, become important in the future.
The returns will depend on the holding period of the ETF units. If the investor holds BHARAT Bond ETF units till maturity, the return may be close to the indicated yield of the Index at the time of investment. BHARAT Bond ETF suit those investors who want to save for a long term yet earn better tax-efficient returns than bank fixed deposits.