Bharat 22 Exchange-Traded Fund (ETF) is the first corporate bond ETF to be launched in India. It was announced by Mr. Arun Jaitley, the then Finance Minister, in his 2018-19 budget speech. ETFs are essentially index funds that are listed and traded on stocks exchanges just like regular shares. The Bharat Bond ETF will be a basket of bonds issued by state firms or any government organisation, and it will be traded on the exchange. Retail investors will be allowed to invest in Bharat Bond ETF. Bharat Bond ETF is targeted at ‘aam janta’ or ‘aam aadmi.’ Retail investors will be able to invest as low as Rs 1,000 in these bonds. Bharat Bond ETF will deepen the debt market in India and diversify the investor base. Bharat Bond ETF will provide additional money for PSUs and other government organisations. ICICI Prudential Mutual Fund will manage the fund. The Fund a basket of stocks with assigned weights that reflects the composition of an index. Bharat 22 comprises 22 stocks including those of central public sector enterprises, PSU banks and holdings under the Specified Undertaking of Unit Trust of India. The ETF is aimed at helping speed up the government’s disinvestment programme. An open-ended ETF, the fund allows investors to invest in a basket of government-owned and private sector entities like NTPC, Power Grid Corporation, ONGC, Indian Oil Company, State Bank of India, Bank of Baroda, L&T, ITC, Axis Bank and BPCL, among others. Bharat Bond ETF will have a fixed maturity of three and ten years and will trade on the local stock exchange. It will invest in a portfolio of bonds of state-run companies and other government entities. Compared to existing options, the new ETF will have a lower fees and better tax treatment. In general, ETFs have become a popular investment vehicle for investors because they allow them to invest in a diverse collection of assets.
Categories: POINT IAS