Investing Bharat 22 ETF PSU ETF

Bharat 22 ETF

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Bharat 22 ETF is an exchange-traded fund launched by the Government of India in November 2017 containing a basket of 22 entities (CPSE and private holdings), complementing the earlier 2014 CPSE ETF . The ETF was designed with broader sectoral diversification to address the energy-sector concentration of the CPSE ETF. Bharat 22 ETF is currently managed by ICICI Prudential Mutual Fund under the Bharat 22 mandate from the Government of India.

For Indian retail investors, Bharat 22 ETF offers:

  • Diversified PSU and private basket: 22 entities across sectors.
  • Discount at FFOs: Government has offered 2-5 per cent discount to NAV in subsequent fund offers.
  • Loyalty bonuses: For long-term holders in some FFOs.
  • Disinvestment participation: Retail access to government divestment of strategic holdings.

This article covers the basket composition, the FFO programme, the role in disinvestment, and the comparison with CPSE ETF.

Basket composition

Constituents

The Bharat 22 ETF tracks the Bharat 22 Index (developed by Asia Index Private Limited for this purpose), comprising 22 entities:

Major Public Sector Enterprises:

  • NTPC: Power generation.
  • Coal India: Coal mining.
  • NHPC: Hydro power.
  • Power Grid Corporation: Power transmission.
  • Indian Oil Corporation (IOC).
  • Bharat Petroleum (BPCL) (subject to disinvestment).
  • Hindustan Petroleum (HPCL).
  • Oil and Natural Gas Corporation (ONGC).
  • REC Limited: Rural electrification.
  • Power Finance Corporation (PFC).

SUUTI (Specified Undertaking of UTI) holdings (private companies):

  • Axis Bank.
  • L&T: Larsen & Toubro engineering.
  • ITC Limited: FMCG and tobacco.

Public Sector Banks:

  • State Bank of India (SBI).

Other CPSEs and entities completing the 22.

Sector composition

Bharat 22’s sector composition is broader than CPSE ETF:

  • Financial services: ~25-30 per cent.
  • Energy (oil, gas, power): ~25-30 per cent.
  • Industrials/Engineering: ~10-15 per cent.
  • FMCG: ~10-15 per cent (driven by ITC).
  • Materials: ~5-10 per cent.
  • Other sectors: balance.

The private-company inclusions (Axis Bank, L&T, ITC) provide non-PSU diversification absent in the CPSE ETF.

FFO programme

Bharat 22 ETF has had multiple Further Fund Offers (FFOs):

  • November 2017: Initial launch raised Rs 14,500 crore.
  • 2018-2019 FFOs: Topped up with multiple tranches.

Each FFO has typically offered:

  • Discount to NAV: 2-5 per cent.
  • Retail allocation: Substantial allocation reserved for retail investors.
  • Loyalty bonus: For holders maintaining units for specified periods.

Manager: ICICI Prudential MF

ICICI Prudential Mutual Fund manages Bharat 22 ETF. The AMC was selected through a competitive bidding process for the initial mandate.

Tax treatment

Bharat 22 ETF is equity-oriented :

  • LTCG (>12 months): 12.5 per cent above Rs 1.25 lakh annual exemption under Section 112A .
  • STCG (≤12 months): 20 per cent under Section 111A .

Comparison with CPSE ETF

DimensionBharat 22 ETFCPSE ETF
LaunchNovember 2017March 2014
Constituents22 (CPSE + private)~11 CPSEs only
Sectoral concentrationDiversifiedEnergy-heavy
ManagerICICI Prudential MFNippon India MF
Disinvestment useBroader basketCPSE divestment

Bharat 22 was designed with broader sectoral diversification specifically to address the concentration concerns of CPSE ETF.

Considerations

Concentration risk

Despite broader diversification than CPSE ETF, Bharat 22 remains concentrated in:

  • Energy and financial services dominate the basket.
  • Single-stock weights can be material (5-10% for top holdings).

Disinvestment programmes

Bharat 22’s composition can change with disinvestment events:

  • BPCL disinvestment process has affected basket composition.
  • Future PSU disinvestments may further modify the index.

Long-term performance

Bharat 22’s performance has been variable, reflecting:

  • PSU sector cycles.
  • Government policy on disinvestment.
  • Sector-specific dynamics.

See also

External references

References

  1. ICICI Prudential Bharat 22 ETF scheme information document.
  2. Asia Index Private Limited Bharat 22 Index methodology.
  3. Government of India DIPAM disinvestment programme documents.
  4. AMFI ETF industry data.

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