Recently government has launched new Exchange Traded Fund Bharat-22.
What is Exchange Traded Fund?
ETF is an investment fund traded on stock exchanges, much like stocks.
An ETF holds assets such as stocks, commodities, or bonds and generally operates with an arbitrage mechanism.
It is designed to keep it trading close to its net asset value, although deviations can occasionally occur.
ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features.
Bharat-22 ETF is the second ETF from Govt. of India after CPSE ETF, hence it is attracting investors in the stock market.
What are the highlights of Bharat 22 ETF?
Bharat 22 is an ETF that will track the performance of 22 stocks, which the government plans disinvest.
The ETF unit represents a slice of the fund, issued units are listed on exchanges for anyone to buy or sell at the quoted price.
The Bharat-22 ETF will span six sectors, such as basic materials, energy, finance, FMCG, industrials and utilities.
Besides public sector banks, miners, construction companies, and energy majors, the ETF will also include some of the government’s holdings in SUUTI (Specified Undertaking of Unit Trust of India).
The Bharat 22 ETF will be managed by ICICI Prudential AMC while Asia Index will be the index provider.
The index will be rebalanced annually.
Why is it important?
The ETF mechanism has proven to be a smart, effective way for the government to help meet its disinvestment targets.
It is a key factor to keep fiscal deficit under control.
The ETF route provides a neat workaround by letting the government pare small stakes (2-3 per cent) in a big basket.
The Bharat 22 ETF has more than double the 10 stocks in the CPSE ETF and much wider sector coverage.
