Should you invest in Bharat 22 ETF


Bharat 22 ETF: Diversified Portfolio Of Growth Stocks

If you believe in India growth story, and are ready to take a little bit of risk in your investment, you can consider Bharat 22 ETF. If you are comfortable with equity exposure, Bharat 22 ETF makes a fit case. It is the second ETF to be launched by Union Government. It was announced by finance minister Arun Jaitley in August 2017 and is likely to be launched by 15th November. As the name suggests, Bharat 22 ETF will have stocks of 22 companies.

Bharat 22 ETF Will Follow CPSE ETF

The first ETF launched by government was CPSE ETF having 10 PSU companies. This ETF was put up by the central government to raise funds through systematic disinvestment in these PSUs. The CPSE ETF consists of:-

  1. Oil and Natural Gas Corporation of India (ONGC)
  2. REC
  3. Coal India
  4. Container Corporation of India
  5. Oil India
  6. Power Finance Corporation
  7. GAIL
  8. Bharat Electricals Limited (BEL)
  9. Engineers India Limited (EIL)
  10. Indian Oil

Through CPSE ETF, the government had garnered Rs. 11,500 crore in three phases.

Difference Between Bharat 22 ETF & CPSE ETF

The main difference between CPSE ETF & Bharat 22 ETF is of number of shares. CPSE ETF has mainly stocks of PSUs from energy sector, whereas companies of Bharat 22 ETF are of 6 different sectors. These sectors are industrials, energy, utilities, banking and finance and FMCG. The stocks in it include 16 Central Public Sector Enterprises, 3 PSU banks and 3 from specified undertaking of UTI. The top 10 companies of Bharat 22 ETF are as follows:-

  1. L&T 
  2. ITC
  3. SBI
  4. Powergrid
  5. Axis Bank
  6. NTPC
  7. ONGC
  8. Indian Oil
  9. BPCL
  10. NALCO

The benchmark of Bharat 22 ETF is S&P BSE Bharat 22 index and it will be managed by ICICI Prudential Mutual Fund. According to me, it should make a place in the portfolio of small investors.

Why Should One Go With Bharat 22 ETF

1. India Growth Story- The stocks in Bharat 22 ETF are either from government companies or those companies wherein SUUTI has made investment. All of these companies are important drivers of India growth story. These companies are getting and will get benefits of various flagship projects of government like Make In India, Digital India and Bharatmala. 

2. Portfolio Diversification- The companies of Bharat 22 ETF have potential to give handsome returns to the investors in the long run. According to the mandate of this ETF, in single stock maximum investment will be 15% and in single sector it will be limited to 20%. Moreover, the portfolio of Bharat 22 ETF consists of 90% large cap shares and the rest midcap and small cap shares. It gives the investors’ portfolio a much needed diversification but at the same time reduces the risks.

3. Expectation Of Good Returns- The first ETF launched by government (CPSE ETF) has given almost 50% return in last 3 years. It was launched in March 2014 at the price of Rs. 19 per unit and these days its price is around Rs. 30. It means that in last three and half years, CPSE ETF has made the investment one and half time of the original. Similar feat is expected from Bharat 22 ETF. According to the brokerage houses’ reports, after March 2006 the shares of Bharat 22 ETF has given average annual return of 13%. During this period sensex has given 9.2% annual return. It is also expected that the government will give some discount to retail investors which will make the investment more attractive. 

4. Cheapest Investment- Though Exchange Traded Fund (ETF) is a type of mutual fund only, but its management expenses is much less than that of mutual fund. It reflects in better return for investors. Moreover, the liquidity of ETF is better than mutual fund since it is traded on exchanges like stocks. 

Bharat 22 ETF: Good Investment With Low Risk 

Though, in any equity investment there are risks involved, but Bharat 22 ETF is a good option for those whose risk appetite is low. For first time investors too, it is a good fit.

Also Read: The Seven Guru Mantras For First Time Investors 

As the banks FD and other small saving schemes are not giving attractive returns, the small investors should think over subscribing it. You can also start SIP in it similar to the mutual fund investment. To sum up, it presents an investor with the opportunity to take exposure to the India growth story through 22 fundamentally strong companies, at a reasonable cost. If you want to know anything else about Bharat 22 ETF or ETF in general, feel free to ask me.

Leave a Reply

Your email address will not be published. Required fields are marked *