‘Bharat-22 offers better value than Sensex, Nifty’

The central government hopes to get at least ~8,000 crore this week by divesting its holding in 22 companies through the Bharat-22 ETF (exchange traded fund). NIMESH SHAH, managing director and chief executive officer, ICICI Prudential AMC, the fund house

The Bharat-22 index is a basket of companies from diverse sectors. What will be the selling point?

The stocks in the index can be equated to the jewels of corporate India, as 16 of the 22 companies in the ETF are Maharatna, Miniratna-I and Navratna companies. A mix of sector leaders from industrials, energy, utilities, finance and FMCG (fast moving consumer goods), a balance between stability and growth. More, the constituents capture key reforms and initiatives of the government, such as financial inclusion, digital and cashless economy, ‘Make in India’, GST (goods and services tax) and infrastructure changes.

The ETF is an attractive investment opportunity due to lower price to earnings and price to book value in comparison to the benchmark Sensex and Nifty 50 indices. Also, the index composition has historically yielded higher dividend in comparison to the benchmarks. To summarise, an individual investor gets the opportunity to access all these benefits at a discounted rate (three per cent) during the NFO (New Fund Offer) period. The index is highly liquid, as more than 99 per cent of the constituents are traded in the derivatives segment.

What, according to you, makes an index diversified?

A set of defensive, cyclical and structural stocks. Bharat-22 ETF meets this requirement. Investors can partake in a variety of stocks that span six sectors; the index blends sectors with secular growth prospects (FMCG and utilities), and cyclicals (energy, metals, industrials). This can help reduce volatility and improve long-term investor return.

How different is Bharat-22 from existing ETFs?

Compared to those, Bharat-22 has a well-diversified portfolio. A sector cap of 20 per cent and stock cap of 15 per cent has been introduced. More important, most of the constituents stand to gain from the government's various development initiatives.

Is there a correlation between it and the benchmark Sensex or Nifty indices?

Over the past one year, the correlation with Sensex and Nifty was 0.9120 and 0.9095, respectively.

What’s the core issue size and greenshoe (over-allotment option)? Will there be more tranches?

The core issue size is ~8,000 crore. There is a provision for additional amount which the fund house, on government instruction, shall notify to the investors after closure of the non-anchor investor period. Future tranches will be as the government decides.

A lot of equity mobilisation has taken place over recent months. Is fatigue building among investors? Will this impact the Bharat-22 NFO?

Given the lacklustre performance of physical assets such as gold and real estate, retail (small) investors are increasingly opting for financial assets. The encouraging aspect in this is that such investors are opting for the balanced category of funds. As a fund house, we are positive on largecaps and believe the Bharat-22 ETF is a good long-term investment opportunity.

Any perks to small investors applying in the NFO?

Investors across categories will get a three per cent upfront discount on the reference market price during the NFO.

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