Bharat-22 ETF is for investors with equity exposure

Though it is more diversified, conservative investors are better off in broader-based ETFs

LATEST NEWS      : The retail investor’s experience with central public sector enterprises’ exchange-traded fund (CPSE-ETF) hasn’t been too bad. Except for a blip in the calendar year 2015, when the fund’s net asset value fell 14 per cent, returns in 2014 and 2016 were 29 per cent and 18 per cent, respectively — substantially higher than the BSE Sensex’s returns of 23 per cent and 1.9 per cent for the corresponding periods. The going was reasonably good even in 2017, with return of 7.8 per cent till August 4. And there was a 5 per cent discount in the new fund offer and follow-on offers for retail investors.

But, returns were good because of a single reason: This energy-heavy index (60 per cent in energy stocks) was able to perform as the sector was doing well. “It is a thematic fund. So, investors betting on the sector would have been able to make good returns,” said a fund manager. With the rally being more broad-based in 2017, returns from the Sensex surged 21.4 per cent till August 4.

The government’s latest exchange-traded fund (ETF), Bharat-22, is different. It resembles a broader index, like the Sensex, more closely. Besides stocks being increased from 10 to 22, it is more diversified in terms of sectors. While the CPSE ETF was energy-heavy, Bharat-22 has capped sectoral exposure to 20 per cent and stock exposure to 15 per cent.

“There is balance between earnings growth and stability. This will ensure investors are neither too disappointed, nor is there high volatility in the index,” said an investment manager closely linked with the structuring of the ETF.

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