BHARAT-22 fund scheme envisioning initial amount of Rs 8,000 crore

The Government of India aims to generate an initial amount of Rs 8,000 crore through the recently launched BHARAT-22 Exchange Traded Fund (ETF) managed by ICICI Prudential Mutual Fund.

The units of the scheme, which was launched on Tuesday evening, will be allotted 25 per cent to each category of investors. In this ETF, the retirement fund has been made a separate category of investors. In case of spill-over, an additional portion will be allocated giving preference to retail and retirement funds. There is a 3 per cent discount across the board, the Ministry of Finance noted.

The strength of this ETF lies in the specially-created Index S&P BSE BHARAT-22 INDEX. This is a blend of shares of key CPSEs, Public Sector Banks (PSBs) and also the government-owned shares in blue chip private companies like Larsen & Tubro (L&T), Axis Bank and ITC.

The shares of the government companies represent six core sectors of the economy - finance, industry, energy, utilities, FMCG and basic materials. This combination makes the Index broad-based and diversified. The sector and stock exposure limits help in risk management and reduction of concentration, providing stability to the Index.

The strength of the Index has been demonstrated in its performance from the time of its launch in August 2017 wherein it has out-performed the NIFTY-50 and Sensex.

The Index constituents include leading Maharatanas and Navratanas such as Coal India, GAIL, Power Grid Corporation of India Ltd. (PGCIL), National Thermal Power Corporation (NTPC), Indian Oil Corporation Ltd., Oil & Natural Gas Corporation (ONGC), Bharat Petroleum, and National Aluminum Company (NALCO), PSBs such as State Bank of India (SBI) and Bank of Baroda, apart from the three private sector companies mentioned earlier.

The Government of India is undertaking a number of key economic reforms which are driving growth in these sectors of economy. The major reforms such as mentioned below for which market expert believe will fuel the growth in the economy and may benefit the underlying stocks in ETF.

Through this instrument, the Centre is looking to divest multiple stocks spread across various sectors in one bundled instrument thereby reducing over hang on individual stocks and maximising sale proceed for the government. This is expected to benefit long term and retail investors by providing an opportunity of participation in equity stocks of the government-run companies and earn stable returns.

On a related note, the new fund offer will be open till Friday.