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Mutual Fund Corner: Should I continue to invest in CPSE ETF and Bharat 22 ETF?

Mutual Fund Corner: Should I continue to invest in CPSE ETF and Bharat 22 ETF?

Mutual Fund Corner: Should I continue to invest in CPSE ETF and Bharat 22 ETF?
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By CNBC-TV18 Mar 7, 2019 8:50:38 PM IST (Published)

Get all your mutual fund related queries answered by our expert, Himanshu Srivastava, on our show Mutual Fund Corner.

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Get all your mutual fund related queries answered by our expert, Himanshu Srivastava, senior analyst manager research, Morningstar Investment Advisers India, on our show Mutual Fund Corner.

Q: 60-year-old Purushotham BG writes to us from Karnataka. Views on CPSE ETF and Bharat 22 ETF. Both are not generating any returns. Should I exit or hang on?
A: The investment proposition offered by CPSE and Bharat 22 ETF is very different from a regular index fund or ETFs. While the CPSE ETF invests in roughly 11 companies from Central Public Sector Enterprise, Bharat 22 ETF invests in 22 stocks collectively from various public sector enterprises, public sector banks and some private companies.
Given their restrictive investment mandate and focused approach, they have a thematic streak in them. In line with their investment mandate, they lack diversification and have a concentrated portfolio both at the sector as well as stock level. While in case of CPSE ETF, the top 10 stocks account for the entire portfolio, in case of Bharat 22 ETF, they account for 85-90 percent of the portfolio.
FundsTotal Ret 1 Yr Total Ret Annlzd 3 Yr % Asset in Top 10 Holdings (As of Jan 2019)
BHARAT 22 ETF(5.01)-85.89
CPSE ETF(17.63)10.6099.30
Also, their concentration levels within the sector are higher.

Sector Allocation Bharat 22 ETF

Sector Allocation CPSE ETF

So given these funds have a slightly aggressive structure, they may not be fit for all investors. One should invest in such funds only if their risk appetite permits and after understanding the investment proposition they have to offer.
Given equity markets have been going through a rough phase, their negative returns are not surprising. But even then, such funds cannot be a part of the core portfolio and should account for a very small portion of the portfolio.
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