Bharat Bond ETF to hit the market on Dec 12; open till Dec 20

The Bharat Bond ETF will invest in debt securities of government companies between 12 Dec- 20 Dec.

Bharat Bond ETF to hit the market on Dec 12; open till Dec 20

Bharat Bond ETF, a mutual fund offering by the Government of India, has received a nod for a New Fund Offer (NFO) from markets regulator SEBI. The fund will launch on December 12 and will be open for investment till December 20, 2019.

What is an ETF?

An Exchange Traded Fund (EFT) is similar to regular mutual funds, that invests in a pool of securities. However, ETFs can only be purchased or sold through stock exchanges like equity investments. These ETFs are listed on the NSE Index, and you can monitor the investment or transact during trading hours.

Related: Gold ETFs vs Physical gold: Which one is better? 

What is the Bharat Bond ETF?

The Bharat Bond NFO mutual fund is a corporate debt fund that will exclusively invest in bonds of select Central Government Public Sector Units (PSUs). The Bharat Bond Fund comes under the same wing as the Bharat-22 Equity ETF and the CPSE ETF that the government had launched in 2014.

Unlike its predecessors, this is exclusively a debt-based investment backed by underlying government-sponsored bonds, making its default risk- zero. The investment will be available for two maturity periods of three years and 10 years.

An estimated 12 Central Government companies may be funded through this ETF. NHAI, Nabard, Hudco, MRPL, Gail, PGCIL, PFC, REC, and IRFC are some of the businesses looking to borrow from the fund.

Related: Dummy’s guide to investing in government bonds or G-Secs

Advantages of investing in the Bharat Bond ETF

Edelweiss Mutual Fund has been entrusted the management of this ETF and will charge subscribers a 0.0005 per cent entry load making it one of the cheapest mutual fund investments anywhere in the world.
Monitoring the investment will be a lot easier too. NSE has launched its Nifty Bharat Bond Index series, where the NSE live Index will track and measure the performance of ‘AAA’ rated government-issued bonds. The two introductory indices within the series are Nifty Bharat Bond Index - April 2023 and Nifty BHARAT Bond Index - April 2030.

The debt fund is tax-efficient as well. For a holding period greater than three years, the applicable tax rate is 20% with indexation. Tax on other government fixed-income investments is based on the investors’ applicable tax slab, without the benefit of indexation. 

Hence this new investment option provides a considerable advantage compared to traditional government-backed securities. For a more detailed understanding, take a look at these 6 Reasons which make ETFs an excellent instrument for investors.

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