Bharat 22 Etf: Investing In India's Future Via Zerodha

Bharat 22 ETF is an open-ended scheme listed on the exchange in the form of an Exchange Traded Fund (ETF). The ETF tracks the S&P BSE Bharat 22 Index, which is designed to measure the performance of select companies disinvested by the Central Government of India. The fund was launched on November 24, 2017, and is managed by ICICI Prudential Mutual Fund House. Bharat 22 ETF is considered a high-risk investment and has a suggested investment horizon of >3 years. The minimum investment required is Rs. 5,000, and the fund size is currently Rs. 20,613.4 crore as of September 30, 2024. Similar to Bharat 22 ETF, there is also the Bharat Bond ETF, which holds bonds issued by Public Sector Companies and other Government organizations.

Investment Objective

Bharat 22 ETF is an open-ended scheme listed on the exchange as an Exchange Traded Fund (ETF). The investment objective of the fund is to invest in the constituents of the underlying index in the same proportion as in the underlying index. The scheme aims to provide returns before expenses that closely correspond to the total returns of the underlying index. The underlying index for the Bharat 22 ETF is the S&P BSE Bharat 22 Index, which is designed to measure the performance of select companies disinvested by the Central Government of India according to the disinvestment program.

The index includes shares of Central Public Sector Enterprises (CPSE), Public Sector Banks, and some of the strategic holdings of the Specific Undertaking of Unit Trust of India (SUUTI). The ETF holds bonds issued by Public Sector Companies and other Government organizations with a credit rating of AAA. Unlike traditional ETFs, Bharat Bond ETFs have defined maturities, with options for 2025 and 2031.

The Bharat 22 ETF is suitable for investors seeking income over the Target Maturity period and an open-ended Target Maturity exchange-traded bond fund. The fund size is currently Rs. 20,613.40 Cr, with a minimum investment of Rs. 5,000 and a minimum additional investment of Rs. 1. The expense ratio is 0.07%, and the fund has no exit load. The suggested investment horizon for the Bharat 22 ETF is >3 years to reduce downside risk and make returns more predictable.

The Bharat 22 ETF is managed by a team of fund managers, including Mr. Kayzad Eghlim, who manages the majority of ICICI iWin ETFs, and Mr. Nishit Patel, Priya Sridhar, and Ajay Kumar Solanki, who joined in 2021 and 2024, respectively. The ETF is considered a Very High-risk investment according to SEBI's latest guidelines.

Investment Options

Bharat 22 ETF is an open-ended scheme listed on the exchange as an Exchange-Traded Fund (ETF). The ETF tracks the S&P BSE Bharat 22 Index, which is designed to measure the performance of select companies disinvested by the Central Government of India. The fund size is currently Rs 20,613.4 crore as of September 30, 2024, with a minimum investment of Rs 5,000 and no exit load. The expense ratio is 0.07% and the fund has trailing returns of 52.81% (1yr), 35.18% (3yr), 27.74% (5yr), and 17.71% (since launch).

To invest in Bharat 22 ETF, you can follow these steps:

• Visit the online trading platform of your choice, such as HDFC Securities (www.hdfcsec.com).
• Login to your account and navigate to the IPO/OFS Tab > IPO > Apply, or Mutual Fund > Current NFO > select BHARAT 22 ETF and click on Purchase.
• Alternatively, you can use a mobile trading app. Login and navigate to More- Mutual Fund -NFO watchlist- Purchase. Note that to apply via a mobile app, your trading account must be enabled with Mutual Fund Privilege.

Another investment option is the Bharat Bond ETF, which holds bonds issued by Public Sector Companies and other Government organizations with a credit rating of AAA. This ETF differs from traditional ETFs as it has defined maturities of 2025 and 2031. The minimum investment amount is Rs 1,001 for Retail Individual Investors and Rs 2,00,001 for Non-Institutional Investors.

To add the Bharat Bond ETF to your Kite watchlist, you can:

• Search for the Bharat Bond ETF using the trading symbol.
• Click on the + sign to add it to your market watch.
• The trading symbol for the Bharat Bond ETF is as follows: EBBETF0423 (maturing on April 2023) or EBBETF0430 (maturing on April 2030).

Returns

Bharat 22 ETF is an open-ended scheme listed on the exchange as an Exchange-Traded Fund (ETF). The ETF tracks the S&P BSE Bharat 22 Index, which is designed to measure the performance of select companies disinvested by the Central Government of India. The top 10 index constituents, as of September 29, 2017, include central public sector enterprises, public sector banks, and some of the specific holdings of the Specific Undertaking of Unit Trust of India (SUUTI).

The Bharat 22 ETF has delivered 12.64% returns since its inception, almost 5 years and 11 months ago. The fund's returns are currently better than the category average. The fund's holdings are mostly in Large Cap stocks and debt instruments, indicating a conservative investment strategy.

The expense ratio of the ETF is 0.05, which is a percentage of the fund's average net assets and is charged to shareholders to cover operating expenses. A lower expense ratio implies better returns over the long term. The ETF has been generating better price returns than bank fixed deposits (FD).

When investing in the Bharat 22 ETF, it is important to consider the fund's risk level. As per SEBI's Riskometer, the risk level of this fund is "Very High". While the fund's holdings are mostly in Large Cap stocks, which tend to fall less when stock prices drop, it is still recommended that investors only invest through the SIP route. This fund is suitable for those with a long-term investment horizon, as investing for five years or more will provide gains that beat the inflation rate and returns of fixed-income options. However, investors should be prepared for ups and downs in their investment value.

Tax Implications

If you sell mutual fund units within 1 year of the investment date, short-term capital gains tax (STCG) is applicable, and the gains are taxed at a rate of 15%. For units sold after 1 year from the date of investment, long-term capital gains tax (LTCG) comes into effect, and gains of up to Rs. 1 lakh in a financial year are exempt from tax. If your gains exceed Rs. 1 lakh, the amount above Rs. 1 lakh will be taxed at a rate of 10%.

Dividend distribution tax is also applicable. The dividend income from the fund will be added to the investor's income and taxed according to their respective tax slabs. If an investor's dividend income exceeds Rs. 5,000 in a financial year, the fund house will deduct TDS (tax deducted at source) of 10% before distributing the dividend.

Risk Grade

RiskGrades (RG) is a trademarked method for calculating the risk of an asset. It is a standardised measure for evaluating the volatility of an asset across various asset classes. The scale starts at zero, which indicates the least risky rating. A rating of 1,000 equals the standard market risk of a diversified market-cap-weighted global equity index. RiskGrades are based on a variance-covariance approach that measures the volatility of assets or asset portfolios as the scaled standard deviations of the returns.

The RG of a risk-free asset is expected to be zero. The RG of a low-risk asset is expected to be between zero and 100. Normal stocks/indexes should have an RG of 100 to 300. Stocks with an RG of 100 to 800 are considered high-risk. IPOs have an RG greater than 800.

RiskGrades change over time to reflect not only the unsystematic risk of an investment but also increases in overall systematic risk in the market. The RG of a portfolio of 2 assets can be calculated using the formula:

> RG^2_p = ( W^2_1 x RG^2_1 ) + ( W^2_2 x RG^2_2 ) + 2 x W_1 x W_2 x r_12 x RG_1 x RG_2

Where:

W = weighting of the asset

The Undiversified Risk Grade (URG) of the same portfolio uses the following formula:

> URG_p = ( W_1 x RG_1 ) + ( W_2 x RG_2 )

Where:

W = weighting of the asset

The Bharat 22 ETF is an open-ended scheme listed on the exchange in the form of an Exchange Traded Fund (ETF). It tracks the S&P BSE Bharat 22 Index, which is comprised of shares of Central Public Sector Enterprises (CPSE), Public Sector Banks, and some of the strategic holdings of Specific Undertaking of Unit Trust of India (SUUTI).

The Bharat Bond ETF holds bonds issued by Public Sector Companies and other Government organisations with a credit rating of AAA. It is available in two maturities: 2025 and 2031.

Frequently asked questions