Bharat Bond ETF (exchange-traded fund) has been in news recently as its second tranche collected ₹10,992 crores. The ETF was launched on July 14 and closed on July 17 with a total size of ₹15,000 crores. Bharat Bond ETF was oversubscribed by three times.

  • In order to understand Bharat Bond ETF, firstly let’s understand what is a bond. A bond is a fixed-income security which allows a lender to lend a predetermined amount of funds and be eligible for interest on those funds. In simpler terms, it means that when we lend a certain amount to a borrower we are eligible for interest on that amount. In the case of government bonds, the borrower is the government and the lender is the person who bought the bond and as government rarely defaults on its loans, so the government bonds are extremely low risk
  • Now let’s understand what an ETF (Exchange-Traded Fund) is. An exchange-traded fund (ETF) is a type of security that involves a collection of securities such as stocks—that often tracks an underlying index. Let’s say there’s an ETF which tracks the Nifty 50 Index and if HDFC Bank comprises of 20% of Nifty Index, then in the fund 20% of the total amount is invested in HDFC Bank.
  • In the case of Bharat Bond ETF, it is a fund which tracks the Nifty Bharat Bond Index and invests in Government Bonds which are rated AAA (highest rating).

Edelweiss Mutual Fund’s Bharat Bond ETF NFO witnessed wide retail participation. It received over 40,000 applications.

The ETF will track Nifty BHARAT Bond IndexApril 2025 or Nifty BHARAT Bond Index – April 2031 depending on the maturity. The indicative yield of Nifty BHARAT Bond Index – April 2025 was 5.60% and Nifty BHARAT Bond Index – April 2031 was 6.75% as on July 06.

Bharat Bond ETF- April 2025 aims to invest in bonds of PSUs like PFC, REC, Power Grid Corporation of India, National Housing Bank, IOC, National Bank for Agriculture & Rural Development, Hindustan Petroleum Corporation, NHPC, Export-Import Bank of India, Indian Railway Finance Corporation, NTPC, Nuclear Power Corporation of India.

Bharat Bond ETF- April 2031 aims to invest in public sector companies like PFC, REC, Power Grid Corporation, National Highways Authority of India, Nuclear Power Corporation of India, Indian Railway Finance Corporation of India, Housing & Urban Development Corporation and NHPC.

Here is the information you need to know about Bharat Bond ETF NFO (New Fund Offering) managed by Edelweiss Mutual Fund:

Q1. What is Bharat Bond ETF?
Ans. Bharat Bond ETF is Exchange Traded Bond Fund which tracks Nifty Bharat Bond Index, which is managed by Edelweiss Asset Management Company. ETF’s invests in a basket of Bonds issued by CPSUs, CPSEs and other government organizations. It offers high security and safety, since all of the bonds are AAA- rated PSU Bonds. The ETF s will be listed on the stock exchange where they can be sold or bought by the investor thereby increasing the liquidity.

Q2. What is their investment strategy?
Ans. It has a Fixed Maturity Period. It follows the Nifty Bharat Bond Index. It holds the bonds till the Maturity and Re-invests the coupons received i.e compounded interest. 95% of the asset is allocated towards AAA-rated PSU Bonds and 5% towards government Securities and REPO Instruments in order to manage the liquidity of the portfolio.

Q3. What are the benefits you avail if you invest in Bharat Bond ETF? Ans.

  1. Stability and predictability of returns at maturity as they invest in AAA-rated Public Sector Undertaking Bonds
  2. Highest Safety: AAA is the highest rating of an instrument and so the invests have an extremely low-risk factor
  3. Transparency: Daily disclosure of portfolio constituents so that the investors are not kept in the dark
  4. No Lock-in: There is no lock-in of capital such as in a PPF, the buyer can buy/sell on the exchange(both BSE & NSE) at any time
  5. Tax Efficient: The investors get the benefit of indexation. Let’s say I invest ₹100 in the market which becomes ₹130 in 3 years, if we assume inflation at 7% then the cost of acquisition is not ₹100 but it is ₹100+7+7+7=₹121. so the 20% tax will not be applied on ₹30 gained but on ₹130-₹121=₹9. In the case of fixed deposits, the total gain is taxable.

Q4. What is the minimum investment amount and cost of management?
Ans. Fund of fund allows to invest a minimum of ₹1,000 and in multiples of Re 1 thereafter. The fund will be managed at a very low cost of maximum Re 1 for ₹2,00,000 worth investment. The fund will charge 0.0005% per annum for assets up to ₹10,000 crores.

In conclusion, it gathered a lot of risk-averse retail investor participation through its attractive minimum investment requirement. So it is for the time that whether Bharat Bond ETF will live up to the hype or not.

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