Exchange Traded Fund Current Affairs - 2019
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The Union Finance Ministry may come out with Rs. 10,000 crore follow-on fund offer of Bharat-22 exchange traded fund (ETF) as it looks to dilute stake in Coal India Limited (CIL) to meet the minimum public holding norm. Besides, it is also keen to takeETF route to sell off government shares held through Specified Undertaking of the Unit Trust of India in private companies (SUUTI)—ITC, Axis Bank and L&T.
The Union Government is planning to raise Rs. 80,000 crore in current fiscal from disinvestment, lower than over Rs. 1 trillion raised in 2017. The Bharat-22 ETF was launched in November 2017 to meet some part of this disinterment target. It comprises shares of 22 companies, including public sector undertakings (PSUs), public sector banks (PSBs), ITC, Axis Bank and L&T. The fund so far has garnered bids to tune of Rs.32,000 crore, although government retained only Rs. 14,500 crore.
Prior to the launch of Bharat-22 ETF, which has diversified portfolio, Union Government had floated CPSE ETF comprising stocks of 10 bluechip PSUs—ONGC, Coal India, IOC, GAIL (India), Oil India, PFC, Bharat Electronics, REC, Engineers India and Container Corporation of India. Through the CPSE ETF, the government had raised Rs. 11,500 crore in three tranches
Exchange Traded Fund (ETF)
ETF is index funds that offer security of fund and liquidity of stock listed and traded on exchanges. Much like index funds they mirror index, commodity, bonds or basket of assets. They are similar to mutual funds in certain manner but are more liquid as they can be sold quickly on stock exchanges like shares.
The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Their price changes daily as they are traded throughout the day. ETF route is considered as safer mode of disinvestment as it shields investors against stock market volatility.
The Union Government launched BHARAT-22 Exchange Traded Fund (ETF) managed by ICICI Prudential Mutual Fund targeting an initial amount of about Rs. 8,000 Crore.
Bharat 22 Index comprise of 22 stocks including those of central public sector enterprises (CPSEs), public sector banks (PSBs) and its holdings under the Specified Undertaking of Unit Trust of India (SUUTI).
ETF has been created Index S&P BSE BHARAT-22 INDEX. It is unique blend of shares of key CPSEs, Public Sector Banks (PSBs) and also Government owned shares in blue chip private companies. It is well-diversified ETF spanning six sectors — basic materials, energy, finance, industrials, FMCG and utilities with a 20% cap on each sector and a 15% cap on each stock.
The sector wise weightage in the Bharat 22 Index is basic materials (4.4%), energy (17.5%), finance (20.3%), FMCG (15.2%), industrials (22.6%), and utilities (20%). This combination makes the Index broad-based and diversified. It has retirement fund as separate category of Investors.
The banking segment includes stocks from State Bank of India (SBI), Axis Bank, Bank of Baroda (BoB), Indian Bank, Rural Electrification Corporation and Power Finance Corporation. The energy segment includes Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), Bharat Petroleum (BP), and Coal India.
The BHARAT-22 ETF is expected to benefit long term and retail investors by providing an opportunity of participation in equity stocks of Government run companies and earn stable returns. It will help to speed up Government’s disinvestment programme budgeted to raise a record Rs 72,500 crore in the FY 2018.
Exchange Traded Fund (ETF)
ETF is index funds that offer the security of a fund and liquidity of stock listed and traded on exchanges. Much like index funds they mirror the index, commodity, bonds or basket of assets. They are similar to mutual funds in a certain manner but are more liquid as they can be sold quickly on stock exchanges like shares. The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Their price changes daily as they are traded throughout the day.