Bharat 22 Index outperformed Nifty 100 by generating a 22% Return in 1 year | Should You Invest?

In this article, we will discuss in detail about Bharat 22 Index which has yielded a strong double-digit return of 22% in the last 1 year outperforming the benchmark index and category average. So, let’s discuss this Index, its replacement criteria, sector & stock allocation, returns, and its risk profile as we move forward.

What is Bharat 22 Index:

• Bharat 22 is both an ETF and FoF established in 2017 by the Government of India, mainly including the companies owned by the government and also the companies which have the government stake under SUUTI (Specific Undertaking of the Unit Trust of India).
•  This ETF has given a 22% return as of 3^rd June 2022 whereas Nifty has given only a 7% to 8% return.
• As the name suggests it is consistent with 22 stocks and there has been no change in any stocks in 5 years. In March every year, the rebalancing of every stock takes place.

Eligibility:

• The following companies listed on the BSE Ltd. are eligible for index inclusion: –
• All companies are classified as Central Public Sector Enterprises (CPSE) by the Government of India.
• All companies are classified as Specific Undertaking of the Unit Trust of India (SUUTI).
• All Public Sector Undertaking (PSU) Banks.
• All other companies were disinvested by the Government of India.
• Companies should form part of the banking sector

Replacement Criteria

There is a policy of the Bharat 22 ETF and FoF that it will not hold more than a 15% stake in any stock and 20% in any sector.

Index Constituents

Source: Ace MF

• This weightage is approx.  with the top three weights has assign to the private sector which comes under SUUTI.
• Apart from the top three, all other companies are public sector undertakings.

Sector Allocation:

Source: Ace MF

• Bharat 22 has almost 40% allocation in the energy sector, 21% in the financial sector like SBI, Axis banks, etc., 16% FMCG, and 15% in Construction.

Returns & Risk:

• The trailing return of one is significantly above Nifty 100 but in 3 and 5 years the performance of Bharat 22 is very poor as compared to Nifty 100.

• Calendar year return has always been negative since 2018 but in 2021 it has given a return of 72% whereas Nifty 100. Has given only 26%. As the PSU is a commodity-based company that is in the boom for the last 1 year because of same this ETF can give a return of 22%.

• The Standard Deviation and Beta of this fund are very high as compared to the Nifty 100 which means that this ETF is taking a very high risk.

How to invest in this ETF

There is 2 option available to invest in this fund, that is:

What should investors do?

Overall, this ETF (Exchange Traded Fund) has only been able to perform in 1 year only, it has always given a negative return compared to the Nifty 100 and also takes a high risk. This ETF is not a fund to invest but one can make decisions according to their risk-taking appetite and return expectation.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.