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7 Things To Know About Bharat Bond ETF

2 Mins 03 May 2021 0 COMMENT

Cautious investors are always on the lookout for safe investment avenues. Among the best options are bank fixed deposits and public sector bonds. Public sector bonds are attractive for their safety, since they have government backing and decent returns. However, they are not particularly accessible to retail investors and lack liquidity because of long tenures.

Bharat Bond ETF (exchange traded fund) could be just what the cautious retail investor needed. They offer decent returns, safety -- and since they are traded on the exchange -- quite liquid as well. Bharat Bond ETF is basically a mutual fund for public sector bonds.

What you need to know about Bharat Bond ETF

    1. Bharat Bond ETF invests in bonds (AAA rated) of public sector entities. It has been initiated by the government and managed under the supervision of Edelweiss Asset Management Company (AMC). The fund will hold the bonds till maturity. There are four different fixed maturity time periods of 2 years to 10 years (the maturity for the Bharat Bond issue will happen in 2023, 2025, 2030 and 2031)
    2. Bharat Bond is ideal for conservative investors, who will get tax-efficient returns compared to fixed deposit schemes of banks. It has a bond-like structure with fixed maturity, providing predictable and stable returns at maturity
    3. Another advantage of Bharat Bond ETF is that the minimum investment amount is as low as Rs. 1,000; you can invest in multiples of Rs. 1 thereafter. This brings it within the reach of small retail investors, who will get the benefit of a safe investment avenue involving low risk
    4. It’s highly transparent with regular disclosure of the portfolio along with live NAVs (Net Asset Values). Bharat Bond ETF tracks the performance of the Nifty Bharat Bond Index and invests in high-quality AAA rated Public Sector Bonds
    5. The expected portfolio yield for the Bharat Bond ETF  2025 is around 5.75%, while the expected returns for the 10-year Bharat Bond ETF 2031 is around 6.75% as of 21 Apr 2021.
    6. There is no lock-in period. You can sell your units like you buy/ sell your shares through your trading & demat account. Thus, it offers significant liquidity to you as an investor. The expense ratio of the bond is also low, at 0.0005%
    7. Bharat Bond ETF has an advantage over bank fixed deposits as the taxation for Bharat Bonds ETF is similar as that on debt mutual funds. If you hold these bonds for over three years, you will have to pay long-term capital gains (LTCG) tax at 20 percent with indexation. That is, the purchase price will be adjusted for inflation, reducing your capital gains, and thus the tax that you pay. In comparison, your interest income on bank fixed deposits will attract marginal rate of tax (can be 30% if you are in highest bracket)


Disclaimer: ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. AMFI Regn. No.: ARN-0845. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.