With the launch of ‘India’s first corporate bond ETF, retail investors will have an opportunity to invest in quality PSU debt for as low as Rs 1,000. “We are giving the retail investor an option to earn more than the fixed deposit rate, and also participate in the development of the country. Bharat bond ETF will be the first corporate bond ETF in the country,” FM Nirmala Sitharaman said in a press briefing. The FM explained that each bond ETF will be priced at Rs 1,000 per unit. The bond ETF will also be listed on the exchanges. Accordingly, investors can buy or sell shares using three methods– via stock exchange, through the market makers or directly through the AMC.
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The umbrella Bharat Bond ETF will be a basket of bonds issued by CPSE, CPSU, or other government organisation. According to Zerodha, Bharat Bond ETF will only hold bonds with AAA credit rating issued state-owned owned companies including REC, PFC, NHAI, National Thermal Power Corporation, Nabard, Exim Bank, Nuclear Power Corporation, and Power Grid among others. The Bharat Bond ETF will have a transparent NAV, (periodic LIVE NAV during the day). Bharat Bond ETF will have a fixed maturity period, like close-ended mutual funds and the units will be also be listed on stock exchanges. As of now, Bharat Bond
The portfolio will also remain transparent, as the value will be disclosed on a daily basis on the website. The ETF will have a very low cost (0.0005%) expense ratio. N0tably, the bond will be managed by Edelweiss AMC. Each ETF will have a fixed maturity date. Explaining the tax implications of investing into the ETF, Zerodha said that in case the Bharat Bond ETF is sold within 3 years, it will be considered as short term and STCG as per the income slab will be applicable. “If sold after 3 years it will be considered as long term and LTCG of 20% with indexation is applicable,” said the firm.
The government is looking at debt ETF’s following the success of Bharat 22 ETF and CPSE ETF in the equity markets. “It will be the first corporate bond ETF, which will provide additional money for PSUs as well as other government organisations,” Finance Minister Nirmala Sitharaman said, while announcing the launch.
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Source: Financial Express