Bharat 22 ETF's subscription in progress: Should you invest?

The subscription for Bharat-22 Exchange Traded Fund (ETF) is in progress. The PSU ETF made its debut on Wednesday as a part of the Narendra Modi government's move to boost its divestment drive.

Compared to its counterpart CPSE ETF which was launched in March 2014, the Bharat-22 Exchange Traded Fund (ETF) is more diversified with blue chips such as ONGC, SBI, IOC, Nalco, BPCL, NTPC and Bank of Baroda as well as SUUTI shares in entities such as ITC, Axis Bank and L&T.

Also read: Bharat 22 ETF vs CPSE ETF: A sneak peek into the two funds

The ETF's expense ratio is 0.0095 percent. A discount of three percent is available for all categories of investors. ICICI Prudential Asset Management Company is the fund manager for the ETF.

Also read: Bharat 22 ETF opens for subscription: Five things to know

"We believe the ETF offers an attractive long-term investment opportunity to partake in the India growth story by way of a diversified blend of companies spread across several sectors and are available at attractive valuation and a good subscription discount," ICICI Prudential AMC managing director and CEO Nimesh Shah said.

The fund, which is expected to fetch around Rs 8,000 crore for the government, will close for subscription today.

"This is the second fund in the PSU ETF series, after Reliance CPSE ETF, which clocked returns twice as Nifty 50 ETF over last one year. The earlier ETF was more skewed towards three sectors and hence the risk factor was high. The current Bharat 22 index is more diversified one with 22 stocks across six sectors. This reduces risk as well as return potential in comparison to the old one. Out of the six sectors, we hold a positive outlook towards 5 of them and neutral in FMCG and hence it is overall futuristic. Also since sectors including banking and metals has been in doldrums since long time, a long term investor is set to benefit from this proposition. Notwithstanding the recent rally in PSU banks post recapitalisation decision, there is long way to go," said Jeevan Kumar, Head of Investment Advisory, Geojit Financial Services.

"The fact that the Fund has only 22 stocks spread across various sectors makes the ETF unique because this ETF will thus have the qualities of a focused and yet diversified fund. The expense ratio of the fund is very, very low compared to the expense ratios of normal mutual fund schemes. This combination of good stocks diversified across sectors and low expense ratio makes BHARAT 22 ETF a good product to own. Bharat 22 ETF is recommended by us, " said Mahesh Bhagwat, Vice President - Products and Advisory, Way2Wealth Brokers Pvt. Ltd

However, some experts believe that this fund is not for the common investors. "Ideally, such funds are for more evolved investors. For a common investors it is better to stick to diversified funds. While Bharat 22 is more diversified as compared to CPSE ETF but it is still a thematic fund with PSU focus. And in time like these when markets have run up quite a bit, it would be prudent for investors to stick to diversified funds and invest systematically," says Anil Rego, CEO & Founder, Right Horizons.

"Not more than 10 per cent of your total financial portfolio in one ETF scheme," says Anil Chopra, Group Director, Bajaj Capital. "All in all Bharat 22 is not a very great fund to be excited about and only evolved investors with  a long-term exposure can put some partial money in this fund," added Rego.

On Tuesday, the ETF comprising 22 companies received robust response from anchor investors. The issue attracted bids with the portion reserved for them getting subscribed six times to the tune of Rs 12,000 crore on the opening day.

ICICI Prudential Mutual Fund-managed Bharat 22 ETFs new fund offer (NFO) has a size of over Rs 8,000 crore.

LIC, Bank of India, SBI Pension Fund, EPFO and HDFC Ergo Insurance among others have put in bids. As much as 25 per cent of total issue size, or Rs 2,000 crore, was reserved for anchor investors who put in bids worth about Rs 12,000 crore, ICICI Prudential MF said. The NFO received subscriptions from across the board including mutual funds, foreign portfolio investors, insurance and retirement funds.