Along with Arundhati, Chanda, Adag, ….add one more smart person. NaMO. He has also seen that the market is high and has decided to sell a lot of his ‘ghar ka maal’. So a PSU etf is here. Wait a minute it also has shares of Axis bank, Larsen and Toubro, and ITC. How these companies are NOT psu I have no clue, but they are generally classified as private sector organisations.

Here is a package of 22 companies that the government of India wants to sell -and in case you are interested to buy it, you could buy the ETF. The government has announced second exchange traded fund (ETF)- Bharat 22 – to be used by the government for its disinvestment program. ETF form of selling psu shares is the smartest thing and the govt. had done a first tranche earlier – remember CPSE ETF?

What are etfs? the are the listed cousins of mutual funds and can be traded on the exchanges just like shares and bonds. The first was CPSE ETF was launched in 2014 (pre NDA) for raising funds through disinvestment public sector undertakings. ICICI Prudential Asset Management company will be the fund manager of the Bharat 22 ETF.

Icici has good marketing skills and it is likely that this ETF will attract a lot of traction – and maybe worth buying. Caveat, I do not like psu as an asset class and I will personally NOT be investing. However, each person has to decide for herself.

Bharat 22 etf  is a diversified portfolio with 22 stocks (as the name suggests!). Bharat 22 is a broad based portfolio with 6 sectors (Basic Materials, Energy, Finance, FMCG,  Industrials & Utilities). The maximum allocation to a single sector  is at 20 per cent. This is to finance and this weightage is better than the Sensex weightage to finance at 30+ percent. L&T and ITC have the highest allocation of 17.1 per cent and 15.2 per cent respectively. I guess the government is hoping that the heavy weights given to LnT and ITC will prop the share up.

April to Sep 2017 has seen a record amount of money raised in an IPO. And the pipeline is even bigger – Hdfc standard life insurance, New India, Reliance Nippon Mutual fund – the BFSI is rushing through all its expensive IPOs. So I like the government’s timing – should I say Icici Prudential’s timing of the ETF issue. It is customary to compare the somewhat similar etf which is already in existence – the cpse etf. The performance is not too stunning and you may have no regrets of having missed the IPO/nfo!

Given the euphoric mood of the IPO market and the huge success of Icici Lombard and SBI Life issues chances are that this ETF may too collect the desired amount.

Should you apply?

I think you should decide for yourself – and- in case you do hold shares in these psu which are being bundled and sold to you, YOU MUST. Sell of your holding in those psu shares and invest in this etf instead. However, I do not think you will miss this in case you do not invest. You will do well to remember that this is like a thematic fund – it has one advantage of having a portfolio of  big dividend payers and shares like LnT, ITC, and Axis bank – all three high growth companies. A nice combination of shares, but still at heart a thematic fund!