All you need to know about Bharat Bond ETF and the working of ETFs.
Bharat Bond ETF is an open-ended Target Maturity Exchange Traded Bond Fund that aims to replicate the performance of the Nifty BHARAT Bond Index. Both Fixed Maturity Plans and Target Maturity Funds have a maturity date. Until the maturity of the Scheme, the underlying securities in these ETFs are held.
Bharat Bond ETF: What will it do?
Bharat Bond ETF will be tradable on the stock exchange and will consist of a collection of bonds issued by public corporations or any government organisation. Nirmala Sitharaman, the finance minister, announced the breakthrough and said that the bond's unit size of Rs 1,000 would enable small investors to invest with a set maturity date. The bond will initially have two maturity series, one each for three and ten years, with a unique index for each series.
The index will be created by the National Stock Exchange (NSE), an independent index provider, and the ETF will be introduced every six months. The initial tranche will be released by Edelweiss Asset Management, but there will be other tranches for which other asset managers may be chosen. The only advisor to the government for the debt ETF is A K Capital Services.
In April 2033, the new Bharat Bond ETF and Bharat Bond Fund of Fund (FOF) series will mature. The government plans to raise an initial sum of 1,000 crore with a green shoe option of 4,000 crore through the introduction of this new series in the fourth tranche.
Also read: Bharat Bond ETF's fourth tranche to be launched today, all you need to know
Bharat Bond ETF, an initiative of the central government, only invests in bonds of public sector companies with a rating of "AAA." The money raised would go toward central public sector enterprises' capital expenditures. They can also use it to fulfil their need for capital expenditures.
Even while a series of corporate defaults has banks and shadow lenders on edge, the action will enable public-sector enterprises to raise money through debt instruments and further expand domestic capital markets, bolstering alternate sources of finance for businesses. Retail investors will also be more involved, who are currently underrepresented in the bond market due to liquidity and accessibility issues.
How do ETFs work?
ETFs, which enable investors to participate in a variety of assets, has grown to be a well-liked financial instrument over time.Investors can purchase shares of an ETF that was created using a certain methodology from an ETF provider. The vendor purchases and dispenses the ETF's portfolio's constituent securities. Despite not owning the underlying assets, investors may still be qualified for dividend payments, reinvestments, and other advantages. The Employees Provident Fund (EPFO), according to government estimates, has invested around Rs 87,000 crore in ETFs.
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 "Bharat Bond ETF, exchange-traded fund, mutual fund, Edelweiss MF, debt fund, YTM, fixed income returns, fixed income investment,")
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