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Looking to invest in a large-cap fund with a strong tilt towards public sector undertaking stocks? The Bharat-22 ETF, to be managed by ICICI Pru AMC, may suit your appetite, what with the exchange-traded fund investing in a mix of stocks comprising three private sector firms and many government-owned companies. The ETF will track the BSE Bharat-22 index.
But return expectations need to be tempered, as its performance since listing has been tepid and some of the sectors in the underlying portfolio such as oil marketing companies operate in spaces that are politically sensitive, restricting pricing power.
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The further fund offer (FFO) comes after the NFO was launched in November last year. The ETF’s NAV has fallen over 6 per cent since its listing; the Sensex in comparison has increased by around 6 per cent over the same period.
Given the relative underperformance of the ETF vis-à-vis the broader markets, it may be tempting to write off the fund. But the Bharat-22 ETF has some very high-quality companies in its basket.
L&T, ITC and Axis Bank — three otherwise high-potential private players that have been relative underperformers in over the past year or so — carry a 40 per cent weightage in the fund.
Oil marketing firms IOC and BPCL have had a tough run over the last six months as crude oil prices soared and State elections made price increases difficult, though prices were passed on to consumers eventually. This political sensitivity is a risk, but these stocks have only 8 per cent weightage in the portfolio.
SBI, GAIL, NTPC, Coal India and ONGC are prominent PSU giants with considerable investor interest. Companies such as NBCC, Bharat Electronics and Engineers India too have delivered well over the long term.
With a solid dividend-paying track record and the relative safety that large-caps offer, investors can buy units of the fund on market declines by parking a small portion of their surplus in the ETF. The 2.5 per cent discount offered to investors adds a bit to the attractiveness.
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