Government may come up with more ETFs, including debt ETFs, soon

Mutual fund investors can expect more Exchange Traded Funds (ETFs) along the lines of Bharat 22 ETF, in the coming year. “The Government introduced Exchange Traded Fund Bharat-22 to raise Rs 14,500 crore, which was oversubscribed in all segments. DIPAM will come up with more ETF offers, including debt ETF,” the finance minister said in his budget speech.

Bharat 22 ETF comprised of 22 stocks of Central Public Sector Enterprises (CPSEs), Public Sector Banks (PSB) and strategic holdings of the Unit Trust of India. It allowed investors an exposure to six sectors- Basic materials, Energy, Finance, FMCG, Industrial and Utilities. This ETF was launched to aid government help in its divestment programme of Rs 72,500 crore in 2017-18. The issue was a great success and helped government raise Rs 14,500 crore. The ETF tracks S&P Bharat 22 Index.

The weightage of each individual stock in Bharat 22 ETF is capped at 15 per cent and each sector is limited to 20 per cent of the overall index weightage. The constituents of the index can be revised annually.

Going by latest information available, Bharat 22 ETF has total assets worth Rs 8,539 crore as on December 31, 2017.

Apart from Bharat 22 ETF, CPSE ETFs were launched earlier as well. looking at the returns, CPSE ETF launched in March 2014 has delivered a one-year CAGR return of 15.05 per cent and a three-year return of 7.68 per cent as on 31^st January 2018.

An exchange traded fund is an open-ended mutual fund scheme which is managed as a passive fund. An ETF tracks its underlying index and invests in same stocks as constituted in the index.