What is Exchange traded fund?
- Exchange traded funds are the open-ended marketable securities which track securities like commodity, bonds and index fund and to give results of the performance of an index.
- Exchange traded fund is same as shares and many other securities and that is why it is also traded in the stock market also and it is a receptive investment approach.
- Exchange traded fund connects the real-time trading benefits and mutual funds benefit.
- It also provides an intra-day trading option along with limit order and stops order limit and margin money trading.
Introduction:
- BHARAT 22 ETF is an exchange-traded fund which is going to launch in the month of November 2017.
- It was declared in the budget of the financial year 2017-2018 and it is a medium by which the government of India will achieve the end.
- BHARAT 22 ETF will measure the output of the Bharat 22 index service which is made of 22 influencing companies, traded domestically.
- This Bharat 22 index is the 22 companies in which government of India has a high percentage of investment and the government want to lessons the stake in it. So, all in one these 22 companies are the government's current disinvestment companies and the source of revenue.
- Bharat 22 exchange-traded fund will be managed by the India's one of the best and largest private sector mutual fund company that is ICICI Prudential Mutual Fund AMC.
Objective:
- To reach the target of disinvestment of Rs 72,500 crore in the financial year 2017-2018.
- To measure the performance of the Bharat 22 index.
- To invest the capital according to the weighted of the investment and return on Bharat 22 index.
- To track the yield on an index and yield on a fund.
Detailed portfolio of Bharat 22 Exchange traded fund
| Company name | Type of industry | Weightage in the index |
|---|---|---|
| State bank of India | Financial industry | 7.25% |
| Axis bank ltd | Financial industry | 7.82% |
| Bank of Baroda | Financial industry | 1.22% |
| Power finance corporation limited | Financial industry | 0.99% |
| Rural electrification corporation ltd. | Financial industry | 1.18% |
| Indian Bank | Financial industry | 0.21% |
| Larsen & Toubro | Industrial sector | 16.92% |
| Bharat Electronics Ltd. | Industrial sector | 3.48% |
| Engineers India Ltd. | Industrial sector | 1.44% |
| NBCC (India) Ltd. | Industrial sector | 0.68% |
| ITC Ltd. | FMCG Industry | 14.26% |
| Power Grid Corporation of India | Utility sector | 7.73% |
| NTPC ltd | Utility sector | 7.07% |
| Gail India Ltd. | Utility sector | 4.25% |
| NHPC Ltd. | Utility sector | 1.08% |
| NLC India Ltd. | Utility sector | 0.27% |
| SJVN Ltd. | Utility sector | 0.23% |
| Oil & Natural gas Corporation Ltd | Energy sector | 5.54% |
| Indian Oil Corporation Ltd. | Energy sector | 5.00% |
| Bharat Petroleum Corporation ltd | Energy sector | 4.54% |
| Coal India Ltd. | Energy sector | 3.72% |
| National Aluminium CO. Ltd. | Basic materials | 5.13% |
Characteristics of Bharat Exchange traded fund.
Extendable investment:
- Bharat 22 ETF is an extendable investment index which covers all the sectors for the investment purpose like banking, industrial, financial services, energy sector, basic materials, utility sector and fast moving consumer goods and services sector and the fund allocated is directly related to the weight given to the single security which is shown in an index.
Cover the top companies:
- In Bharat 22 ETF, It covers the largest government companies in terms of market capitalization and all these companies is already listed on the Bombay stock exchange, one of the best stock market of the Indian market.
Real-time transactions:
- Bharat 22 ETF is also traded on the stock market and that is why it uses real-time transactions. Bharat 22 ETF is also traded directly from the ICICI Prudential Mutual Fund AMC.
A high rate of return:
- As in Bharat 22 ETF, there are fewer expenses as compared to the other mutual funds and as a result of this; it would yield a higher rate of return on it. Brokerage fees or the redemption charges are charged from the very beginning of the investment. so, it will reduce the burden on later.
Reduction to the retail investors:
- As an initial offer, a government of India has offered a 3 percent of discount to the investors who invest less than of Rs 2 lakhs.
Taxation rules
- From the taxation point of view, A Bharat 22 ETF is like an equity investment because all investment is in listed companies and as per the taxation rules Exchange traded fund are not applicable under the wealth tax but the gain from it either a short-term or a long-term is considered as per the taxation rule, gain within a 1 year is considered as a short-term gain and more than 1 year is considered as long-term gain.
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