An open-ended exchange traded fund investing in S&P BSE Bharat 22 Index.

Bharat 22 ETF is set to open its second tranche today, 19th June 2018.

It is an open-ended Exchange Traded Fund investing in S&P BSE Bharat 22 Index and was initially launched in November 2017 as a part of GOI's disinvestment plan.

Department of Investment and Public Asset Management (DIPAM), Ministry of Finance and Government of India appointed ICICI Prudential Asset Management Company Limited to launch and manage the BHARAT 22 ETF in accordance with SEBI Regulations. In accordance with this, the AMC had formulated this Scheme, which was initially offered to the public for subscription by way of a New Fund Offer (NFO).

Now it has opened its second tranche to take the disinvestment plan further.
Salient features of this Bharat ETF 22 FFO are:

1. Retail investors are being offered 2.5 % discount

2. Its expense ratio is just 0.01%

3. Dividend yield is around 2.6%

4. No Loyalty Units will be offered to the investors during the FFO of the scheme

Scheme Details of Bharat 22 ETF

Investment Objective of Bharat 22 ETF*

The investment objective of the Scheme is to invest in constituents of the underlying Index in the same proportion as in the underlying Index, and endeavor to provide returns before expenses, which closely correspond to the total returns of the underlying Index.

However, the performance of the Scheme may differ from that of underlying index due to tracking error.

The Scheme does not guarantee or assure any returns.

*Source: Scheme Information Document

(Read: What You Should Read In A Scheme Information Document)

Is Bharat 22 ETF for you?

Bharat 22 ETF is an open-ended exchange traded fund investing in S&P BSE Bharat 22 Index. Being an index fund and as the name suggest the fund invests in 22 stocks of the index.

Though the portfolio is diversified across different sectors, it is skewed to the top holdings. The top 5 holdings as on May 31, 2018 include Larsen & Toubro, ITC, State Bank Of India, Axis Bank and NTPC Ltd. The top 5 combined exposure is of upto 56%. Hence, the overall portfolio return will be affected by the performance of these 5 stocks.

Bharat 22 ETF is suitable for investors who wish to participate in the disinvestment plan of the Government of India. And looking for a passively managed exchange traded fund which is highly liquid and has very low expense ratio.

Asset Allocation of Bharat 22 ETF

The asset allocation of Bharat 22 ETF under normal circumstances will be as under:

Instruments	Indicative allocations (% of total assets)		Risk Profile High/Medium/Low
	Minimum	Maximum
Securities of companies constituting the underlying index $	95	100	Medium to High
Units of Liquid/Money Market Mutual Fund schemes, Money Market Instruments (with maturity not exceeding 91 days) including CBLO, Cash & cash equivalent	0	5	Low to Medium

$ Including derivatives instruments to the extent of 5% of the Net Assets.
* The Scheme can take exposure upto 20% of its net assets in stock lending.

(Source: Scheme Information Document)

Investment Strategy Of Bharat 22 ETF

Being an index fund, the corpus of the Scheme will be invested predominantly in stocks constituting the underlying index in the same proportion as in the Index and endeavor to track the benchmark index.

A very small portion (0-5% of the Net Assets) of the Scheme may be kept liquid to meet the liquidity and expense requirements. The performance of the scheme may not commensurate with the performance of the underlying index on any given day or over any given period. Such variations are commonly referred to as the tracking error. The Scheme intends to maintain a low tracking error by closely aligning the portfolio in line with the index.

Equity Strategy:

The Scheme would invest in stocks comprising the underlying index – S&P BSE Bharat 22 in an endeavor to track the benchmark index.

Fixed Income Strategy:

The Scheme may also invest in money market instruments (with maturity not exceeding 91 days), including CBLO, cash & cash equivalents, in compliance with Regulations to meet liquidity requirements. The scheme may also invest in liquid schemes/ money market schemes of the Fund.

Money Market Instruments include commercial papers, commercial bills, treasury bills, and Government securities having maturity upto 91 days, call or notice money, certificate of deposit, usance bills, CBLOs and any other like instruments as specified by the Reserve Bank of India from time to time.

Fund Manager for Bharat 22 ETF

Bharat 22 ETF will be managed by Mr Kayzad Eghlim.

Mr Kayzad is a graduate in Commerce and M. COM along with being a MBA. He has been associated with ICICI since 2008. Prior to that he has been associated with IDFC Investment Advisors Ltd, Prime Securities and Canbank Mutual Fund.

 Other Schemes managed by Mr Enghlim are ICICI Prudential Nifty Index Fund, ICICI Prudential Nifty Next 50 Index Fund, ICICI Prudential Sensex ETF, ICICI Prudential Equity– Arbitrage Fund – Equity Portion, ICICI Prudential Nifty ETF, ICICI Prudential Nifty 100 ETF, ICICI Prudential NV20 ETF, ICICI Prudential Midcap Select ETF and a few more.

Fund Outlook of Bharat 22 ETF

The fund was initially launched in November, 2017 and hence the performance track record is of only few months till now. And it is a very short period to analyse the overall performance of the fund to invest your hard-earned money. The fund has generated negative returns of around -5.7% in the last 6 months for its investors. And hence the future performance of the fund too looks gloomy.

But as with all sector and thematic funds, the fund may incur heavy losses when the sector hits a rough patch. Most of the stocks constituting the PSU ETF belong to sectors such as Energy, Financial Services, and Industrials.

Being infrastructure oriented, these sectors can be hit hard by the prevailing lull in the economy. Changes in the government policies can heavily affect the growth of these sectors. During such times how, the PSEs play their business strategies, needs to be watched.

[Read: Why You Should Be Careful About Investing In NFOs]

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