Jaitley announces a new ETF by the Name “BHARAT 22”

Arun Jaitley Union Finance Minister
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Union Finance Minister Shri Arun Jaitley announced here today a new Exchange Traded Fund (ETF) by the name BHARAT 22. Bharat 22 consists of 22 stocks of CPSE’s, PSB’s & strategic holding of SUUTI (list as in Annexure). Compared to energy heavy CPSE ETF, Bharat 22 is a well Diversified portfolio with 6 sectors (Basic Materials, Energy, Finance, FMCG,  Industrials & Utilities).   The Bharat 22 Index will be rebalanced annually. ICICI Prudential AMC will be the ETF Manager and Asia Index Private Limited (JV BSE and S& P Global) will be the Index Provider.

In the Budget Speech of 2017-18, the Finance Minister Shri Arun Jaitley had promised to use ETF 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 2017-18, the Government has realised approx Rs 9,300 crore through nine disinvestment transactions so far.

 Globally ETF Assets have grown significantly. Globally today there is 4 trillion dollar worth Assets Under Management (AUM). These are expected to touch $7 trillion by 2021. Large Investors (Sovereign/Pension Funds) prefer investing in ETFs due to the benefits of  ETF being Low cost & Less risky; being Highly Liquid assets; Transparent Investment and that these can be traded at Real Time Market Price

 

Highlights of Growth of ETF market in India include:

 

  • Flexibility in Investment guidelines of PF to invest in equity/ETF
  • ETF Assets Under Management (AUM) has grown ~5 times in last 3 years

 

Month AUM (Rs. in crore)
Jun-17 53,917
Mar-17 50,215
Mar-16 20,698
Mar-15 12,838
Mar-14 11,403

 

  • ETF has been a preferred instrument for investment by PF’s following flexibility given to them by govt. for their investments.
  • Government raised Rs.8500 crore by divesting through CPSE ETF in FY’16-17.

 

 

1: Bharat 22 Index – Index constituents

 

Sr. No. Company Name Basic Industry Weight (%)
1 National Aluminium Co Ltd Basic Materials 4.4
Total – Basic Materials (%) 4.4
2 Oil & Natural Gas Corp Ltd Energy 5.3
3 Indian Oil Corp Ltd Energy 4.4
4 Bharat Petroleum Corp Ltd Energy 4.4
5 Coal India Ltd Energy 3.3
Total – Energy (%) 17.5
   
6 State Bank of India Finance 8.6
7 Axis Bank Ltd Finance 7.7
8 Bank of Baroda Finance 1.4
9 Rural Electrification Corp Ltd Finance 1.3
10 Power Finance Corp Ltd Finance 1.0
11 Indian Bank Finance 0.2
Total – Finance (%) 20.3
   
12 ITC Ltd FMCG 15.2
Total – FMCG (%) 15.2
13 Larsen & Toubro Ltd Industrials 17.1
14 Bharat Electronics Ltd Industrials 3.3
15 Engineers India Ltd Industrials 1.5
16 NBCC (India) Ltd Industrials 0.6
Total – Industrials (%) 22.6
   
17 Power Grid Corp of India Ltd Utilities 7.9
18 NTPC Ltd Utilities 6.7
19 Gail India Ltd Utilities 3.7
20 NHPC Ltd Utilities 1.2
21 NLC India Ltd Utilities 0.3
22 SJVN Ltd Utilities 0.2
Total – Utilities (%) 20.0

 

 

Annexure 2: Reform initiatives and benefiting component sectors

 

Sr. No. Government Reforms/ Initiatives Sectors that may benefit
1 Financial sector reforms:

•    Insolvency and Bankruptcy Code 2016

•    Monetary Policy Committee

•    Expansion of Banking sector

•    Digital and Cashless Economy

•    Listing of Insurance Companies

•    Finance
2 Taxation reforms:

•    Goods and Services Tax (GST) – Single Indirect tax structure aimed at eliminating cascading effect of indirect taxes.

•    Basic Materials

•    Energy

•    Finance

•    FMCG

•    Industrials

•    Utilities

3 Infrastructure reforms:

•    Improvement in quality of infrastructure

•    Speeding up clearance of stalled infrastructure projects

•    Basic Materials

•    Industrials

4 Liberalisation of Foreign Direct Investment (FDI) in India:

Progressive liberalisation to permit FDI in most sectors under the automatic route.

•    Finance

•    Industrials

5 Manufacturing in India:

•    Expanding Manufacturing facilities in India

•    International Skill Development Centre for domestic workers.

•    Basic Materials

•    FMCG

•    Industrials

6 Oil & Gas Sector Reforms

•    Direct Benefit Transfer of LPG subsidies

•    Introduction of Daily Fuel pricing.

•    Energy

•    Utilities

7 Energy Sector Reforms

•    Providing 24×7 quality, reliable and affordable power supply

•    Revival package for electricity distribution companies of India (DISCOMs).

•    Energy

•    Finance

•    Utilities