11 Things To Remember Before Investing In Bharat 22 ETF
You Must Know These Points About Investing In Bharat 22 ETF
Investing in bharat 22 ETF can be proved a wealth-creator in long term as it consists of many blue chip stocks. But you must know the following 11 points which are important for your investment decision.
1. What Is Bharat 22 ETF
Bharat 22 ETF is an open-ended Exchange Traded Fund. It comprises of shares of listed Central Public Sector Enterprises (CPSE), companies of SUUTI & others. It will be managed by ICICI Prudential Asset Management Company. Bharat 22 ETF will invest in the securities of the underlying constituent companies of “S&P BSE Bharat 22 Index” in similar composition and weightages as they appear in the index. For retail investors, its New Fund Offer (NFO) opens on November 15, 2017 and closes on November 17, 2017.
2. Which Companies Are In S&P BSE Bharat 22 Index
There are 22 stocks under the S&P BSE Bharat 22 Index. It is well diversified index across 6 sectors. These sectors are Basic materials, Energy, Finance, FMCG (Fast-Moving Consumer Goods), Industrials and Utilities. The stock level capping is at 15% and sector capping is at 20%. It will be rebalanced annually. Some of the stocks in this index are SBI, ONGC, BEL, IOC, Axis Bank, Coal India, ITC, BPCL, GAIL and L&T.
3. Discount For Investing In Bharat 22 ETF
Units of Bharat 22 ETF will be offered at a discount of 3% to those who will apply in its NFO. This discount will be on the basis of the Reference Market Price. Reference Market Price will be determined as an average of FVWP (Full Day Volume Weighted Price) on BSE from November 15 to November 17, 2017. It means that when the trading will start after listing of ETF units on exchange, you will already be sitting on 3% gain.
4. Low Expense Ratio On Investing In Bharat 22 ETF
Expense ratio plays an important role in the returns generated by mutual funds. It is a good thing that the expense ratio on Bharat 22 ETF is very low. According to the website of ICICI Pru AMC, the expense ratio on this ETF is upto 0.0095% for 3 years from listing of units of Bharat 22 ETF.
5. Tax Implication On Investing In Bharat 22 ETF
Taxation for Bharat 22 ETF will be like that of equity shares or equity mutual funds. As per the current tax laws, capital gains from investments held up to one year will be classified as STCG i.e. Short Term capital Gain. It will be taxed at 15% plus surcharge and cess as applicable. LTCG i.e. Long Term Capital Gain will be tax exempt. LTCG will be considered if you remain invested in the ETF for more than one year.
6. Ways For Investing In Bharat 22 ETF
You can apply for investment in Bharat 22 ETF NFO via online as well as offline mode. If you want to apply offline, you can submit the application forms at the service centres of ICICI Prudential AMC or CAMS. For online application, ICICI Prudential AMC website, IPRUTOUCH mobile app and other platforms like BSE Star MF, CAMSONLINE etc may be used. You can also apply through your stock broker. You must remember that it is mandatory for the applicants to hold a Demat account. Without a demat account, your application would be rejected. It is so because the unit will be delivered in demat form only, not in physical form. After its listing, for investing in Bharat 22 ETF, you will have to buy the units from secondary market.
7. How Much Can Be Invested In Bharat 22 ETF NFO?
For retail investors, the minimum application amount is Rs. 5,000. The maximum limit is Rs. 2 lakh. The maximum limit is same as that for application money in IPO of any stocks for retail investors. Investors can apply in multiple of Rs. 1 up to Rs. 2 lakh. Retail investors should not submit multiple applications. If multiple applications are submitted (even through separate demat account), and the application value exceeds Rs. 2 lakh, his applications will be rejected.
8. When Will Be The Units Allotted After Investing In Bharat 22 ETF?
ETF units of Bharat 22 will be allotted to the successful applicants in whole numbers within 5 business days from the closure of the NFO period. The units will be delivered directly to the demat account of the applicant. There is no lock-in period for all Non- Anchor Investors which include the retail investors as well. The units allotted to Anchor Investors during the NFO period shall be locked-in for a period of 30 days from the allotment date.
9. When Will The Trading Start After Investing In Bharat 22 ETF?
The ETF units of Bharat 22 will be listed on BSE & NSE within 5 working days from the allotment date. After listing of these units, trading happens on the exchange similar to any other listed securities. After listing you can start trading or make more investments, if you wish to.
10. What Will Happen If You Are Not Allotted Any Unit?
There are slim chances that you will not be allotted any unit of Bharat 22 ETF, if your application is genuine. In fact, if the NFO issue is over-subscribed, the units will be allotted in proportion to the amount of applications received. And if the issue is under-subscribed, all the units applied shall be allotted. Refund amount, if any, will be directly credited to the bank account of the applicant registered with his/her Demat account. Refunds will be processed within 5 business days from the date of allotment.
11. What Will Be The Risks After Investing In Bharat 22 ETF
There will be as much risk after investing in Bharat 22 ETF as you take while making investment in any mutual fund. In fact, the brochure of the NFO suggest that investment in this ETF comes under High Risk. According to the experts, this scheme is suitable for investors who are seeking long-term wealth creation. If you can remain invested in Bharat 22 ETF for a longer period, it may be proved an investment vehicle having benefits from some of the best blue chip companies.
I hope that you will have all your queries answered by this article. But if you have any question about Bharat 22 ETF in your mind, feel free to ask it.