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BHARAT 22 ETF and FOF.

BHARAT 22 ETF and FOF (FFO and FOF Period -19th June to 22nd June)


For the government objective of disinvestment in CPSE stocks of Rs. 72,500 cr., Finance Minister announced BHARAT 22 ETF in its Union Budget Speech 2017. ICICI Prudential AMC Ltd. has been appointed by the GoI to launch and manage the BHARAT 22 ETF consisting of shares of listed Central Public Sector Enterprises (CPSEs) and other corporate entities. Government dis-invested Rs. 14,500 Crore during last NFO which was oversubscribed to Rs 32,000 Crore.

BHARAT 22 FOF:

This time along with ETF, Fund of Fund of Bharat 22 is also launched, this will invest in Bharat 22 ETF. Investing in Bharat 22 FOF has below mention benefit:

  • 5% discount is offered in FOF as well
  • It will allow Non Demat holders to invest in Indian Growth story of Bharat 22 ETF
  • For taxation it is considered as equity oriented fund
  • Limit of retail investor in both ETF and FOF is 2 Lakhs but as application in both will be considered separately so a client can invest up to 4 lakhs combine.

BHARAT 22 ETF:

BHARAT 22 Exchange Traded Fund, an open ended traded fund investing in S & P BSE Bharat 22 index is getting issued at a 2.5% discount^. This will be listed on BSE Ltd. and National Stock Exchange of India Ltd and underlying index will be S & P Bharat 22 index.

Investment Objective:

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.

Why BHARAT 22 ETF?

  • Diversification across 6 sectors can help reduce volatility and improve risk adjusted returns.
  • Sector includes both secular growth sector and cyclical growth sector.
  • Mix of leaders from different sectors representing balance between stability and growth.
  • Higher dividend yield in comparision to S & P BSE Sensex / Nifty 50*
  • Stock level cap of 15% and sector level cap of 20% applied annually Stock and Sector cap at rebalancing.
  • The constituents of the index capture the various key reforms and initiatives of the GoI like Financial Inclusion, Digital and Cashless Economy, Make in India, GST, Infrastructure Reforms, etc.
  • GoI has declared offer of 2.5% discount^ during FFO
  • Attractive investment opportunity due to lower P/E and relatively better Earnings Growth in comparison to Nifty 50/ S&P BSE Sensex*.

About underlying index – S & P BSE Bharat 22 index:

  • The S&P BSE Bharat 22 Index is designed to measure the performance of select companies disinvested by the Central Government of India according to the disinvestment program.
  • Stock weighting mechanism – Free Float Market Capitalization Weighting Method
  • Weight caps – Stock level cap: 15%; Sector level cap: 20%
  • Rebalancing – Annually in March
  • Additions/ deletions to the index – As per GoI notification on their website.

Sector Allocation:

Banks                                      :                19.1%

Oil Companies                        :                19.3% 

Power Companies                 :                 15.9%

Infra and Housing                  :                 16.8%

Basic Material                         :                 5.5%

S&P BSE Bharat 22 Index stocks:

                         Top 5 Stock

Scrip Name                                             (%) of Market value

ITC Ltd                                                            15.32 

State Bank of India                                       8.87

Axis Bank                                                       8.78

NTPC Ltd                                                        7.71

Power Grid Corp of India Ltd                     6.95

Market Capitalization:

Large cap                                                     92.10

Mid Cap                                                        7.90

Small Cap                                                       —

Total                                                           100.00

Past Performance:

Name of Index                                                      Total Returns (CAGR %)

                                                         1 year             3 year           5 year               10 year

S&P BSE Bharat 22 Index              0.2                   13.0              13.0                   11.8

S&P BSE SENSEX                             15.1                   9.8               13.9                   9.5

Fundamental Attributes:

Name of Index        Earning Growth      P/E                        P/BV             Dividend Yield

                                     (FY20E)        FY19E      FY20E     FY19E     FY20E        May – 18

S&P BSE Bharat 22 Index        22%                  17                14                  2.8               2.5                    2.5
S&P BSE SENSEX                     19%                   18                15                  2.6               2.3                   1.1

 

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