NEW DELHI: The Government has created a new exchange-traded fund (ETF) — Bharat-22 — representing shares of 22 central public sector enterprises, state-owned banks and 15.2 per cent holding in the Specified Undertaking of Unit Trust of India (SUUTI).
Announcing the fund, finance minister Arun Jaitley said that it will cover six sectors. Four banking stocks — SBI, Axis Bank, Bank of Baroda and Indian Bank — and other central public sector units (CPSEs) such as Nalco, ONGC, IOC, BPCL and Coal India. It will also include nine public sector companies. SUUTI’s 11.19 per cent holding in ITC has also been included. The ETF will have a single company cap of 15 per cent, while a sectoral cap of 22 per cent will also be in place, Jaitley said. Ninety per cent of the equities included are traded in futures.
An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange.
ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. Because it trades like a stock, an ETF does not have its net asset value (NAV) calculated once at the end of every day like a mutual fund does. The Government has raised Rs 8,500 crore by divesting through the CPSE ETF in FY’16-17.
According to finance ministry, globally there are about $4 trillion worth Assets Under Management (AUM), and is expected to touch $7 trillion by 2021. Jaitley, in his Budget speech of 2017-18, had promised to use ETFs as a vehicle for further disinvestment of shares. The target for CPSE’s disinvestment in 2017-18 was set at Rs 72,500 crore. During the current financial year, the Government has realised approx Rs 9,300 crore through nine disinvestment transactions so far.