Centre starts ETF for PSUs, lenders:
Context:
Finance Minister Arun Jaitley on Friday announced the introduction of Bharat 22, a new exchange traded fund (ETF) comprising 22 stocks including Centre Public Sector Enterprises (CPSEs), public sector banks (PSBs), and Specified Undertakings of the Unit Trust of India(SUUTI).
Introduction:
- Arun Jaitley said that the ETF will have a single company cap of 15 per cent, while a sectoral cap of 22 per cent will also be in place.
- In his recent Budget speech, Arun Jaitley had said that the government would be using ETFs to bolster its disinvestment efforts.
Bharat 22:
- Bharat 22 is a well-diversified ETF spanning six sectors- basic materials, energy, finance, FMCG, industries, and utilities.
- Bharat 22 will have 15.2 per cent of SUUTIs holdings.
- The weightage in the Bharat 22 Index given to basic materials is 4.4%, energy 17.5%, finance 20.3%, FMCG 15.2%, industrials 22.6%, and utilities 20%.
- Among the 22 stocks, IOC, BPCL and NALCO will have 4.4 per cent weight each in Bharat-22. Power Grid will have 7.9 per cent weight, while Axis Bank (7.7 per cent), SBI (8.6 per cent) and Coal India (3.3 per cent) ITC (15.2 per cent), ONGC (5.3 per cent), NTPC (6.7 per cent) will have 3-15% weightage in the ETF.
Key points:
- ICICI Prudential would be the ETF Manager and Asia Index Private Ltd. would be the Index Provider.
- In 2016-17, the revised disinvestment target was Rs 45,000 crore and the government realized Rs 46,247 crore. This comprised CPSE, strategic disinvestment and income from SUUTI.
- This year, the target was set at Rs 72,500 crore and government has realized Rs 9,300 so far.
- The banking segment includes stock from State Bank of India, Axis Bank, Bank of Baroda, Indian Bank, Rural Electrification Corporation, and Power Finance Corporation.
- The energy segment includes Oil and Natural Gas Corporation, Indian Oil Corporation, Bharat Petroleum, and Coal India.
- Globally, today there are $4 trillion worth of assets under management (AUM). These are expected to touch $7trillion by 2021.
- The first central public sector enterprises (CPSE) ETF, which was set up in 2014, comprised of 10 companies — Oil and Natural Gas Corp. (ONGC), Coal India, Indian Oil Corp. (IOC), GAIL (India), Oil India, Power Finance Corp. (PFC), Bharat Electronics, Rural Electrification Corp.(REC), Engineers India Ltd and Container Corporation of India.
