Launch of Bharat Bond Exchange Traded Fund

Launch of Bharat Bond Exchange Traded Fund

(An open ended Target Maturity Exchange Traded Fund predominately investing in constituents of Nifty BHARAT Bond Index – Aril 2025 & April 2031)

Managed by Edelweiss Asset Management Ltd.

Offer Period – 14th July, 2020 – 17th July, 2020

In our continuous endeavour to update our valued investor about the New Investment Ideas / Theme, we would like to share Launch of Bharat Bond Exchange Traded Fund  (An open ended Target Maturity Exchange Traded Fund predominately investing in constituents of Nifty BHARAT Bond Index – Aril 2025 & April 2031) managed by Edelweiss Asset Management Ltd.

What is Bharat Bond ETF?

Ø  Public Sector Companies: An Exchange Traded Mutual Fund which will invest your money in bonds issued by Public Sector companies

Ø  Defined Maturity: The fund will have a defined maturity date and at maturity you will get back your investments proceeds along with returns.

Ø  Exchange Traded: You can buy or sell units of this fund on exchange anytime during the tenure of the fund.

Why should you invest in BHARAT Bond ETF?

Ø  Safety: Your money will be invested in bonds of Public Sector Companies

Ø  Returns: You can earn stable return with lower tax over the maturity period

Two Options to choose from:

v Option 1: Bharat Bond Apr 2025 – YTM : 5.64%, Post Tax Return : 5.31%pa

v Option 2: Bharat Bond Apr 2031 – YTM : 6.81%, Post Tax Return : 6.28%pa

NOTE: Rate of Inflation assumed 4%


Investment Strategy

Ø  ETF will have a fixed maturity date like a bond

Ø  ETF Maturities will be – April 2025 and April 2031

Ø  ETF will follow Nifty BHARAT Bond Index

Ø  ETF will invest only in AAA Rated Bonds issued by Public Sector Companies maturing on or before the maturity of the ETF

Ø  ETF will hold bonds till their maturity and coupons received will be reinvested

Ø  Up to 5% allocation towards G-Sec / CBLO for liquidity management

Nifty BHARAT Bond Index

Ø  Index will follow a Target Maturity structure

Ø  Index to follow a buy and hold strategy where existing bonds are held till maturity

Ø  Weight allocation based on outstanding debt amount of the issuer in the particular period Issuer weights to be capped at 15%

Ø  Any issuer that ceases to be a CPSE, CPFI or Statutory body or the rating is downgraded below AAA, shall be removed from the index on the next rebalancing date.

NIFTY Bharat Bond Index – April 2025 constituents as on 26th June 2020

NIFTY Bharat Bond Index – April 2031 constituents as on 26th June 2020

Indexation Example:

ü  Assumed Tenure for Traditional Investment and Bond ETF (5 Indexation ) 4.74 Years and Tenure for Traditional Investment and Bond ETF (11 Indexation) 10.76 Years.

ü  Assumed Rate of Inflation is 4%.

ü  *Traditional investment Taxed at 30% + 4% Cess & BHARAT Bond ETF Taxed at 20% + 4% Cess post indexation

ü  Above is only for illustration purposes. Please consult you TAX Advisor before making any investment. 

Author: Midas Finserve

Leave a Reply

Your email address will not be published. Required fields are marked *