Thread by @avasthiniranjan

There are questions on portfolio deployment of BHARAT Bond ETF, we hereby address them one by one. Hope this shall be useful.

1. Why deployment is taking so much time.
-Almost 12,400 cr is to be deployed by the ETF through primary issuances.

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For this purpose, the gross issuance (ETF + other investors) shall be to the tune of over 25,000 cr. in the market. Since this is a huge amount spread accross multiple issuers, all this cannot be done 1 or 2 days, but over few days so that it doesn't disrupt the market.
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ETF has started investing from last week and significant portion will be invested in the coming week. Till that time it is being deployed in TREPS. 2 issuances have already happened till yesterday and shall reflect after settlement period.

2. What is the opportunity loss due to delay in deployment?
- Asuming PF is fully deployed by 10th Jan and till then money is deployed in TREPS and earns on an average 5% yield from 26th Dec (allotment date), the opportunity loss is around 0.02% in 3 yrs and 0.01% in 10 yrs.

- assuming investor had invested in liquid fund during this period, he would have earned a post tax return of ~3.4% while through ETF he earns more, as ETF doesn't have to pay tax. So on net basis the opportunity loss is very very low.
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- Having said that, since this is the 1st issue the deployement has taken longer, but in future issues portfolio will be deployed much faster to avoid any opportunity loss, even if it is 1 or 2 bps.
The mandate of ETF is to closely replicate the index performance.
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The tracking error which has occurred in the initial 2 weeks, the ETF will aim to cover it up in the remaining period by optimising the portfolio in the normal course during unit creation and redemption.

- The ETF will aim to achieve its ultimate goal to match index performance

Most big FMP raises have taken 7 to 10 days to deploy and build entire portfolio and have still delivered optimal returns. Only thing that is different here is, unlike FMP, ETF portfolio is being disclosed daily in a transparent manner hence, it has come as a surprise.
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3. What are the current yields and what is the impact of RBI's operation twist on yields?

- At the time of NFO start 3yr yields were around 6.69% and 10 years yields were around 7.58%.
- Even after RBI's actions 3 year index yield today is ~6.74% and 10 yr index is ~ 7.56%.

We would urge investors not to fall for roumors and illogical analysis.

During the NFO there were some illogical analysis on liquidity as well. After listing of ETF, liquidity is enough and bid ask spreads are in 2 to 3 bps range. Much lower than that in underlying bonds.

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Similarly, ETF will deliver performance closer to index till maturity and we request investors to not panic and trust us on this.

If you have any questions you could directly reach us before concluding on any analysis. My email id is [e-mail]