How different will be Bharat 22 compared to other ETFs?

When it comes to Bharat 22 ETF, we have 22 stocks spread across sectors with sector weightages capped at 20 per cent, making it more diversified than several other indices. Most of the constituents of this index stand to gain from the reforms agenda of the government. Also, the ETF will have low expense ratio compared to other schemes in the industry.

How do you see diversification in this index with six sectors and 22 companies?

We believe this index is diversified than most other indices. For adequate diversification, an index requires a set of defensive, cyclical, and structural stocks. All of the three requirements are met by S&P BSE Bharat 22 index. This is considering that the index is not restrictive to any theme and with sector weightage capped at 20 per cent.

What can investors hope from their investments in this fund?

There are essentially three benefits for investors for investing in this fund and they are:

1. The constituents of the index is poised to capture the benefits of various key reforms initiated such as Goods and Services Tax (GST), financial inclusion, digital and cashless economy, infrastructure reforms, Make in India, and Direct Benefit Transfer (DBT) of subsidy. All these reforms have the potential to enhance the earnings growth of the constituent companies, thus benefitting the investors.

2. In terms of dividend yield, S&P BSE Bharat 22 Index scores over S&P BSE Sensex. The dividend yield offered by the S&P BSE Bharat 22 Index for the financial year 2016-17 was about 2 per cent compared to 1.3 per cent offered by S&P BSE Sensex, which adds to the overall returns.

3. The expense ratio of the ETF is one of the lowest in the industry, which will add to the overall return.

How can retail investors participate in this ETF?

Retail investors can subscribe to the ETF during the NFO period. Post this they can buy and sell units of the Bharat 22 ETF on the exchanges on real time basis. Given that the underlining constituents have a large investor base, ETF will have sufficient liquidity, which will ensure a lower impact cost of transacting.

Chintan Haria
ICICI Prudential AMC

olmdesk@outlookindia.com