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Bharat 22 ETF: Know Everything About It Research Team | Posted On Saturday, October 05,2019, 05:42 PM

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Bharat 22 ETF: Know Everything About It



Bharat 22 ETF is a passively managed mutual fund scheme. Bharat 22 ETF aims to replicate the S&P BSE Bharat 22 Index by buying the same stocks in the same proportion. Fund managers do not have any extra exposure other than the chosen index or the 22 companies that comprise the S&P BSE Bharat 22 index. The 22 stocks are of Central Public Sector Enterprises, Public Sector Banks and SUUTI (Specified Undertaking of the Unit Trust of India). The weightage of each individual stock has been capped at 15% and each sector at 20% within the overall index weightage.

Let’s take a look at the benefits of Bharat 22 ETF. It has low expense ratio. You get exposure to 22 stocks of Government Companies with an amount as low as Rs 5,000. Bharat 22 ETF enjoys the diversification benefit. The portfolio is diversified across 6 sectors like FMCG, energy, basic materials, finance and industrials/utilities. You get exposure to India’s largest public sector enterprises (Bluechip stocks). The 5 largest companies are L&T, ITC, SBI, NTPC and Axis Bank under the Bharat 22 ETF. In the Union Budget, the announcement was made of giving Bharat 22 ETF, ELSS like benefits. ELSS enjoys Section 80C tax deduction up to Rs 1.5 Lakhs a year. Further clarifications are awaited. 

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See Also: Features of Exchange Traded Funds (ETF)

Bharat 22 ETF: Know Everything About It

What does Bharat 22 ETF comprise?

If you invest in Bharat 22 ETF you get exposure to SBI, BPCL, Axis Bank, L&T, BOB, ITC, ONGC, IOC, NTPC, Coal India, REC, NBCC, BEL, PFC, National Aluminum Co, Powergrid, GAIL, NHPC, Engineers India, Indian Bank, SJVN Ltd and NLC India Ltd.

Who should invest in Bharat 22 ETF?

If you want to invest in stocks of public sector enterprises in a cost-effective manner, opt for Bharat 22 ETF. You enjoy liquidity and can convert the investment to cash easily. You could create wealth over the long term.

Should you invest in Bharat 22 ETF?

Bharat 22 ETF has been a loser since the first tranche was issued in November 2017. With a CAGR of just 0.4% (This also takes into account the 3% discount), it’s not a great investment. Over the same period Nifty 50 has given 7.2% returns. (Till 27th September).

The opening issue in November 2017 had a discount of 3%. The first tranche after the issue in June 2018 offered a discount of 2.5%. The tranche in February 2019 offered a discount of 5%.

Now, investors in different tranches have fared in different ways. Taking into account the discounts, the first 3 issues have given returns of 0.4%, 3.6% and 12.5%. The Nifty 50 has returned 7.2%, 7.1% and 8.2% in the same period.

If you had invested in the February 2019 issue, you would have outperformed the Nifty. (There was a discount of 5%). Not so lucky if you had invested in the earlier tranches.

Now, the Government has come up with a fresh tranche of Bharat 22 ETF for investors. This would be open to individual investors from October 4th. You get units of Bharat 22 ETF at a 3% discount on face value.

Many people are investing in Bharat 22 ETF to enjoy the 3% discount. If you study the daily movements, you will find average daily movement of 0.8% in Bharat 22 ETF. On some days there have been swings in excess of 3% which means the 3% discount you enjoy may be wiped out in a day. You also have transaction costs like brokerage, 15% short-term capital gains tax on any short term capital gains you make. So, if you are in Bharat 22 ETF for the short term, you could suffer losses. Stay away from it. This is a play only for long-term investors.

See Also: Should You Invest in Bharat 22 ETF?

Bharat 22 ETF


Discount (%)

Returns with Discount

Tranche I




Tranche II




Tranche III




Note: Returns which are less than a year are absolute. The returns which are greater than a year are on CAGR basis. Returns are calculated up to 27th September 2019.

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