The bond ETF’s are the primary source of investment for the Government. The Indian Government has cleared the launched of the first ETF in India called the Bharat Bond ETF. It got launched to deepen the bond of the market and allow all the retail investors an opportunity to participate.
The product launched by the Government unveiled after two years of deliberations made from the ends of the Government. Various other stakeholders are involved in the unveiling of the Bharat Bond ETF too.
In a move aimed at strengthening all the cost of borrowing and corporate market, the Bharat Bond ETF targeted. The Cabinet Committee of Economic Affairs chaired by PM Narendra Modi launched while approving the creation of the Bharat Bond Exchange Trade Fund in the year 2019, December 4th.
What is the primary purpose of the Bharat Bond ETF?
The Bharat Bond ETF is a basket of bonds issued from the end of the public sector companies and any government organization. The Bharat Bond ETF is a tradable stock exchange. Finance Minister Nirmala Sitharaman said that the unit size of these bonds of 1000 Rs would allow all the small investors to put their money.
It even comes with a fixed maturity date. As of now, the Bharat Bond ETF has two maturity series. One is for three years, and another is for ten years. Each of the series has its separate index of the same maturity series.
It implies that the Bharat Bond ETF will have a defined maturity, which means that they will mature after a fixed period. Alike all the close-ended mutual funds on the market, the units of the ETF are all listed on the stock exchange. It will offer only growth option for the investors and no dividend options.
How the indexing constructs on Bharat Bond ETF?
The ETF is launched every six months, and the index remains constructed by the help of the National Stock Exchange. NSE is an independent index provider. Edelweiss Asset Management will launch its first tranche for which a variety of assets managers duly get appointed.
This move will help all the public sector companies raise funds with the help of debts. The Bharat Bond ETF will even help in the further development of domestic capital markets. It will boost alternative sources of the variety of funding, even as a series of corporate defaults.
This will leadingly increase all the participation of the retail investors who are currently not participating in the bond markets.
What are the various prospects of return for Bharat Bond ETF?
With the help of Bharat Bond ETF, all the stakeholders can participate in the leading growth of India with lesser risk. With the use of the Bharat Bond ETF, investors can look out for assured returns. It will be a better investment option than all the fixed deposits kept at the bank. The ETF allows all the investors to invest in the short term, say three years or even ten years.
A primary shareholder can invest in these ETF’s with a minimum of just around 1000 rs. With a standard benchmark performance, the ETF delivers around 50-140 basis points. These are more than any of the government bonds shared over the ten years scope.
What are the key things to remember before investing in ETF?
Here are the key things to remember before you invest in Bharat Bond ETF.
- The tax implications
The Bharat Bond ETF will get taxed at the same rate as the debt mutual funds. It is 20 per cent on the indexation benefits if the bonds are held for more than three years. The after-tax yield onto the Bharat Bond ETF is about 6.3 per cent and 7 per cent. These are for the three and the ten years, respectively. Bharat Bond ETF is a tax-efficient bond. It proposed for the long term investment options for the conservative debt fund and investors.
- How will the retail investors find their profit here?
With the help of the Bharat Bond ETF, the retail investors can scope out for profit too. It has launched a feature called the fund for the fund. This ETF is to facilitate investment by retail investors by the use of just an average mutual fund.
- Is this a good investment for you?
Now the main question lies. Should you invest in the Bharat Bond ETF? Say, there is a bond structure which has a fixed maturity period. It has predictable returns, and at the same time, they are stable.
These come in a quotient of higher safety since they are the funds that are invested only in the public sector bonds. With the help of the daily disclosure of the portfolio constituents and the live net asset values, these bonds become transparent. Bharat Bond ETF is a more significant opportunity for all investors.
It helps them to invest in a debt that comes at an affordable value. As far as the Indian debt exchange market is concerned, the debt value is positive reinforcement for all the investors. Tarun Birani, the CEO of TBNG Capital Advisors, have commented and said that people like to invest in options from where they can yield results.
- Will the Bharat Bond ETF come with an exit load?
There is a 0.10 per cent exit load with the use of the Bharat Bond ETF. If the fund is covered or switched out on or ere the competition of the 30 days from the date of allocation to the investors, but, the shareholders ought to give the NIL Charges if individual bonds are redeemed/switched following the completion of the 30 days. These done from the date of the allotment of the variety of units shared by the bond.
Other key features to take note of
For all the index constituents present with the Bharat Bond ETF, there is a quarterly rebalancing of work. Weights are equally assigned based on the total outstanding amount of the respective bonds taken by the investors.
Higher the exceptional amount for Bharat Bond ETF, the higher the weight. The exposure of every relationship is only restricted to 15 per cent of the index as per the SEBI guidelines. The current yield of the three-year underlying indexing is around 6.7 per cent. For those who are yielding on the scope of the ten years, it is about 7.6 per cent.
How can you invest?
If you are an investor and you hold a Demat account, then you can invest in the Bharat Bond ETF. For those investors who don’t have a Demat account, don’t worry. There is an alternative to the investment via Bharat Bond ETF, having the same line of maturity and the underlying ETF.
With the help of the form of NFO, which is present at www.bharatbond.com, you can fill up the details and then submit it accordingly.