ICICI Direct is an innovative trading platform from ICICIbank that allows you to invest in various financial instruments, including ETFs. This article will go over all you need to know about Bharat 22 ETF, including what it is, what investment objectives it covers, and how to invest in it online through ICICI Direct.
What is an ETF in general?
An exchange-traded fund or ETF is a means through which you can invest in the stock market without acquiring individual stocks. ETF can also be considered marketable securities that track a commodity, a bond, an index, or a mix of assets, such as the Index fund. That is, it is simple to use ETF as it allows you to invest in many assets at once and frequently has cheaper fees than other types of funds.
What is ICICI Bharat 22 ETF?
This ETF is an open-ended large-cap equity scheme through which you can invest in public and private companies. The government of India built the foundation of Bharat 22 ETF in the 2017 Union Budget to achieve disinvestment goals, and the current policies continue to favour the growth of its index.
What are the constituents of the S&P BSE BHARAT 22 Index?
The Bharat 22 Index (which is the underlying of the BHARAT 22 ETF) is made up of 22 stocks from the Central Public Sector Enterprises (CPSE), Public Sector Banks (PSBs), and Strategic Holdings of Specified Undertakings of Unit Trust of India (SUUTI), which are dispersed across six sectors (Basic Materials, Energy, Finance, FMCG, Industrials and Utilities).
Most stock in this index weighs no more than 15%. However, with 40% of its assets invested in the top three stocks, the Bharat 22 ETF has a highly concentrated portfolio. Private companies ITC, Larsen & Toubro, and Axis Bank are among the top three stocks.
Note! The dividend yield of the S&P Index managed by ICICI Prudential Mutual Fund is approximately 2.55%.
Features and benefits of ICICI Bharat 22 ETF
Here are a few advantages of the Bharat 22 exchange-traded fund that make it one of the most convenient vehicles for investment:
- It provides greater transparency than typical open-ended funds by publishing all holdings and documents in the public domain.
- ETF units see real-time price movements. There is also an opportunity to use indicators, such as RSI, to show the strength of the price.
- You can trade it intraday like shares. Limit and stop orders can also be used to buy or sell the ETF.
- Bharat 22 ETF has low transaction costs and a lower fee ratio than actively managed mutual funds.
- You can use this ETF as collateral in the same way as securities (loan against securities).
The investment objective of the Bharat 22 ETF is to seek to generate an additional income that closely matches the overall return of the underlying index, i.e., to invest in the constituents of the underlying index in the same proportion as in the index itself. However, it should be noted that the scheme’s efficiency may not match the productivity of the underlying index, for example, due to a tracking error.
Note! The product is suitable for those who plan to create long-term capital. The indicative horizon for investing in Bharat 22 ETF may constitute five years or more.
What are the tax implications?
The Bharat 22 ETF is taxed similarly to other equity mutual fund schemes. Short-term capital gains (STCG), or gains on investments held for less than a year, are taxed at 15% plus any relevant surcharges or cess. Long-term capital gains (LTCG) are taxed at 10% on profits on investments held for more than a year (only if the revenues exceed Rs 1 lakh).
How to invest in Bharat 22 ETF online
You can buy Bharat 22 ETF shares through a brokerage firm like ICICI Direct. One of the ways to put capital is ICICI Prudential Bharat 22 FOF (fund of funds scheme). Investment in it is quite simple; all you need to start is to open a free Demat account online through the platform’s website or the IPRUTOUCH mobile app.
Note! For retail investors, the minimum lump sum investment in Bharat 22 ETF is Rs. 5000.
The scheme is aimed at investors who want to build long-term capital with a diversified portfolio that includes high-quality public sector undertakings. Investing in Bharat 22 ETF is considered safe as it is managed by ICICI Prudential Mutual Fund, one of India’s leading asset management companies. However, the risk level of the ETF is high. Remember that share prices are volatile and keep changing according to the market situations. It is recommended to carefully analyze the market to reduce the risk of loss. Visit the Knowledge Center on the ICICI Direct platform for more information on ETFs or other financial instruments.