Bharat-22 ETF Tranche-III Opens on 14-Feb-2019 – Should you invest?

Bharat-22 ETF Tranche-III  – Feb 2019 Review


After 8 months, Bharat-22 ETF Tranche-III would open for subscription on 14th February, 2019. Bharat-22 Exchange Traded Fund (ETF) consists of 22 blue chip stocks including public sector companies where Govt of India has a minority stake. The Bharat 22 ETF is the second ETF from Govt. of India after CPSE ETF. What is a Bharat 22 ETF? What stocks are part of this ETF? How is the Performance of Bharat 22 ETF post the launch of Tranch-I and Tranche-II? Should you invest in Bharat-22 ETF Tranche III of Feb 2019?

Also Read: High Return Mutual Fund Schemes to invest in 2019

What is an Exchange Traded Fund (ETF)?


In simple terms, an ETF is an exchange-traded fund (ETF) which is comprised of specific stocks.  If stock prices go up or down, ETF NAV would also fluctuate. It simply reflects the underlying stocks of the ETF.

What is a Bharat-22 ETF Index?


Bharat 22 ETF was launched in November, 2017 as part of Govt of India Disinvestment plan last year.

Bharat-22 ETF is where 22 public sector companies are part of this Index. ICICI Pru AMC is the ETF Manager for Bharat 22 ETF Index. Govt of India is planning to disinvest, for over Rs 10,000 Crores this year 2018-2019. It came for Tranche-II in June, 2019. Bharat 22 ETF Tranche-3 is being launched now as part of the FY2018-2019 Disinvestment plan.

Features of Bharat 22 ETF Trache-III


Bharat 22 ETF Tranche 3 would open for subscription on 14th February, 2019 and closes on same day.

Bharat-22 ETF Index consists of a diversified portfolio of 22 Blue Chip Stocks.

Govt of India is issuing this Tranche-III to get approx. Rs 10,000 Crores.

This ETF consists of state owned companies like ONGC, IOC, SBI etc.

This ETF also consists of companies where Govt of India includes partial stakes like Axis Bank, ITC, Larsen and Toubro etc.,

This ETF also consists of blue chip stocks owned by Govt. India through its holdings through Specified Undertakings of the Unit Trust of India (SUUTI).

Current Bharat-22 ETF NAV is Rs 33.74 per unit as of 11th February, 2019 evening price.

This ETF NAV would go up or down based on the share prices of 22 underlying stocks under this ETF.

Who is managing the Bharat-22 ETF?


Ministry of Finance has appointed ICICI Prudential AMC as ETF Manager for this fund.

What sectors are part of this Bharat-22 ETF Portfolio?


Bharat-22 ETF consists of Energy, Financial Sector, FMGC Sector, Industrial segment and Utilities segment.

Which stocks does Bharat 22 ETF Portfolio contain?


Bharat ETF would span across 6 sectors and consists of 22 stocks. This ETF cannot invest more than 20% in a single sector. Also, this ETF cannot invest more than 17% in one particular stock. Top 10 holdings under Bharat 22 ETF stocks are given here along with current Assets size.

Basic Materials Segment

1) National Aluminium Co Ltd  (NALCO) – 4.8%

Energy Segment

2) Oil & Natural Gas Corp Ltd (energy) – 5%

3) Coal India Ltd (energy) – 3.67%

Banking and Financial Segment

4) State Bank of India (finance) – 9.94%

5) Axis Bank Ltd (finance) – 12.2%

FMCG Segment

6) ITC Ltd (FMCG) – 16.38%

Industrial Segment

7) Larsen & Toubro Ltd (Industrials) – 15.89%

Utilities Segment

8) Power Grid Corp of India Ltd (utilities) – 6.66%

9) NTPC Ltd (utilities) – 4.83%

10) Gail India Ltd (utilities) – 4.5%

Reasons to invest in Bharat-22 ETF FFO


1) Bharat 22 ETF stocks consists of 22 public sector companies where Govt of India has a minority of the stake. This is a good investment plan if someone wants to invest in high future growth potential companies for long term. This scheme provides greater diversity of investments.

2) All retail Investors would get a 5 % discount on the NAV.

Reasons not to invest in a Bharat-22 ETF Follow-on Fund Offer of Tranche-3


1) Bharat 22 ETF which was launched in November 2017 ad currently trading at 8.5% less than the issue price.

2) BHARAT 22 ETF is only the name of the Scheme and does not in any manner indicate either the quality of the Scheme or its future prospects and returns.

3) As the price/value/interest rates of the securities in which the Scheme invests fluctuate, the value of your investments in the Scheme may go up or down.

4) BHARAT 22 ETF is an Exchange Traded Fund (ETF). There can be no assurance that an active secondary market will develop or be maintained.

5) Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved.

6) The NAV of the Scheme may be affected by changes in the general level of interest rates and trading volumes.

7) The NAV of the Scheme may be affected by settlement periods and transfer procedures.

8) In the event of receipt of inordinately large number of redemption requests or of a restructuring of the Scheme‟s portfolios, there may be delays in the redemption of Units.

9) The Liquidity of the Scheme‟s investments is inherently restricted by trading volumes.

10) Investors in the Scheme are not being offered any guaranteed returns.

11) Mutual funds being vehicles of securities investments are subject to market and other risks and there can be no guarantee against loss resulting from investing in the Scheme. The various factors which impact the value of the Scheme‟s investments include, but are not limited to, fluctuations in interest rates, prevailing political and economic environment, changes in government policy, factors specific to the issuer of the securities, tax laws, the liquidity of the underlying instruments, settlement periods, trading volumes etc.

12) The past performance of the mutual funds managed by the Sponsors and their affiliates/associates is not indicative of the future performance of the Scheme.

13) Investment decisions made by the AMC may not always be profitable.

14) Further, as per the Regulation, in case the AMC invests in any of the Schemes managed by it, it shall not be entitled to charge any fees on such investments.

You may like: Best Short Term Funds to invest in India

How to subscribe to Bharat-22 ETF ?


If you have a demat / mutual fund account, you can visit IPO/NFO/FFO section of your account and locate Bharat ETF Tranche 3 link. You can select the same and indicate the amount and submit the same.

How was the performance of Bharat 22 ETF till now?


Here is the performance of this ETF till now

1) Bharat 22 ETF Tranche-1 was launched in Nov 2017. Bharat 22 ETF Current NAV is Rs 33.8 which is 8.5% lower than the issue price. However since Govt of India has issued them 3% discount, retail investor would be still at loss of 5.5%.

2) Bharat 22 ETF Tranche 2 was launched in Jun/Jul-2018. The NAV is almost same even now compared to Tranche-2 price. However since retail investors got 2.5% discount at that time, only this marginal profits are available with them now.

Should you invest in a Bharat-22 ETF Tranche III in Feb 2019?


Bharat 22 ETF Index has not performed well in the last 15 months after
Tranche-I was launched. The returns are 9% negative compared to Tranche-I that came in Nov-2017. It gave almost 0% returns after Tranche-II that came in Jun-2018. Liquidity is also an issue. My advice is that investors should stay away from such high risk investment options and invest in a diversified portfolio of mutual fund schemes that may fetch good returns.  

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Suresh

Bharat-22 ETF Tranche III Opens on 14-Feb 2019 – Should you invest

2 Comments

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  1. It is a sound and well researched advice.I will follow it.Thanks

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