NFO review: ICICI Prudential Bharat 22 ETF

ICICI Prudential AMC has launched Bharat 22 ETF, an open-ended exchange traded fund, that will invest in S&P BSE BHARAT 22 index. The ETF is a part of government’s Rs 72,500-crore disinvestment program. The ETF aims to bring Rs 8,000 crore to the government.

NFO window is open for anchor investor from today. It will be open to retail investors from tomorrow.

Where will the ETF invest?

The fund aims to replicate the S&P BSE Bharat 22 Index, which will invest in 22 stocks in CPSE universe, stakes held under the Specified Undertaking of the Unit Trust of India (SUUTI) and Public Sector Banks (PSBs), mostly largecap companies across six sectors.

Currently, the index comprise large companies like ITC Ltd, Indian Oil Corp Ltd, Larsen & Toubro Ltd, SBI and so on. The portfolio of ETF will be rebalanced annually in March.

What does it offer?
The NFO is offering a discount of 3 per cent to all categories of investors. Unlike actively managed funds, it has a very low expense ratio of up to 1 bps (1 bps=0.001 per cent). The AMC claims it to be the lowest expense ratio in India ETF universe.

The S&P BSE Bharat 22 Index holds mostly large and stable stocks, which reflects in its return. The index has beaten benchmark indices like Sensex (See table below).

Should you invest?
Nimesh Shah, MD & CEO, ICICI Prudential Asset Management Company, says the ETF is an attractive opportunity for long term investors. “We believe the ETF offers an attractive long term investment opportunity to partake in the India growth story by way of a diversified blend of companies spread across several sectors and are available at attractive valuation and a good subscription discount,” he says. “The highlight of the Scheme is its in-built mechanism for rebalancing and ability for periodic booking in stocks which has delivered better returns,” he adds.

Mutual fund advisors also see the ETF as a good option for long-term investment. Shweta Jain, Chief Operating Officer, International Money Matters, a SEBI registered financial advisor, says, “It is a diversified portfolio for the long term. The 3% discount makes it slightly attractive for investors. Investors looking at diversified, low cost options to invest in, large cap companies with a good dividend paying track record can consider this fund. One needs to have a demat account to invest in this.”