ETF Formation to Disinvest by Govt

Govt has been planning to disinvest in few Companies to bring down the fiscal deficit further from the existing 3% of GDP level. Though the Govt has already overachieved the target for FY 16-17, it is still quite aggressive in further reducing the same down.

In order to do the same, Govt. has announced the launch of its 2nd Exchange-traded fund (ETF) – Bharat 22.

It comprises of 22 stocks including those from Central Public Sector Enterprises (CPSEs), Public Sector Banks & its holdings under the Specified Undertaking of Unit Trust of India (SUUTI)

Bharat 22 ETF will have a diversified portfolio of companies from six sectors with a 20% cap on each sector & a 15% cap on each stock.

ETF – Exchange-traded funds (ETFs) are essentially index funds that are listed & traded on exchanges just as stocks trade on exchanges. It is a basket of stocks with assigned weights that reflects the composition of an index.

The stocks included in the ETF are

  • National Aluminium Co. Ltd from basic materials
  • ONGC, IOC, Bharat Petroleum Corp. Ltd, & Coal India from the energy sector
  • State Bank of India, Axis Bank, Bank of Baroda, REC, PFC & Indian Bank from the finance sector
  • L&T, BEL, Engineers India Ltd & NBCC (India) Ltd from the industrials sector
  • ITC from the packaged consumer goods sector
  • Power Grid Corp. of India Ltd, NTPC Ltd, GAIL India, NHPC Ltd, NLC India Ltd & SJVN Ltd from utilities
  • ICICI Prudential has been appointed as the fund manager of the new ETF.

    ETF is a successful experiment globally with assets under management (AUM) of $4 trillion. Over four years, AUM is expected to touch $7 trillion as sovereign & pension funds have started preferring the ETF mode of investments.