Should you invest in Bharat Bond ETF?

The NFO of Bharat Bond ETF & Fund Of Fund (FOF) 2032 maturity opens tomorrow. Bharat Bond is a debt ETF that will only hold bonds issued by public sector undertaking (PSUs). Unlike traditional ETFs which don’t have an expiry, Bharat Bond is a target maturity ETF that will expire. In this case, in 2032.

If you are new to all this and have no clue about ETFs, check out this Varsity chapter👇

What do you mean by a defined maturity ETF?

A normal open-ended ETF doesn’t have a maturity date. It will trade for as long as the ETF is listed. But the Bharat Bond ETF will have maturity dates. To start with, Edelweiss is launching 2 series of ETFs. 2023 ETF and 2030 ETF which will expire in those respective years and the AMC will keep launching new series. Each series will have an index and the ETF will just track that index.

What is the Bharat Bond ETF?

Bharat bond ETF is a debt exchange-traded fund (ETF) that will only invest in AAA bonds issued by PSU companies owned by the Government Of India.

What will the ETF hold?

The ETF will only hold bonds with AAA credit ratings issued by the Government of India owned companies such as REC, PFC, NHAI, etc.

What do you mean by target maturity?

When you buy a traditional ETF like a Nifty ETF, it doesn’t have a maturity date, you can hold it for as long as you want. But the Bharat Bond ETFs use a target maturity structure, meaning they have a fixed maturity date, just like a normal bond. So in this case, the ETF will mature in 2032, and you’ll get the maturity amount in your bank account. This structure is called as target maturity.

How safe is the ETF?

Two of the biggest risks in bonds are default risk and interest rate risk.

Default risk: It’s the risk of a company not paying back its debt. Since the ETF will only hold bonds issued by PSUs, there is very minimal default risk. PSU bonds carry an “implicit sovereign guarantee.” Meaning, the Govt doesn’t explicitly say that it guarantees the debt, but it is understood that if something goes wrong the Govt will step in.

Interest risk: Bond price and interest rates have an inverse relationship. Interest rate risk is the market risk you have to bear due to interest rate changes. As interest rates rise and fall, the yields of the underlying bonds will rise and fall and by extension the price of the ETF. However, if you are holding the ETF until maturity, interest rate risk won’t matter to you.

Check out the chapter on debt funds to understand more

How will the interest payments be paid?

The coupons in the ETF will be reinvested. And once the ETF matures, the entire proceeds will be paid out to you.

What will be the expense ratio of the ETF?


Can I sell the ETF before maturity?

Yes, you can, just like any other ETF. But a general word of caution, there might be some liquidity risk in ETFs given that ETFs aren’t really all that popular in India. By liquidity risk I mean, the difference between bids and offers. You can avoid this by placing limit orders.

What returns can I expect?

The yield of the 2032 ETF is 6.87% if held to maturity.

What will be the taxation on this ETF?

If sold within 3 years, it will be considered as short-term and STCG as per your 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.

When is the issue opening and how can I buy Bharat Bond ETF?

The NFO opens on December 3rd and closes on December 9tth.
You can invest in Bharat Bond ETF here .
You can invest in Bharat Bond FOF here .

Constituents of the ETF.

The ETF/FOF will track the Nifty Bharat Bond 2032 index

Index Name Yield Residual Maturity Macaulay’s Duration
Nifty BHARAT Bond Index – April 2032 6.81% 9.83 7.14

ETF/FOF yield: 6.87% if held to maturity.
Modified duration: 6.84 years
Maturity: 15th April 2032

ETF/FOF holdings

Issuer Rating Weight %

Advantage of Bharat Bond ETFs

One of the popular bond investing strategies is called laddering. You invest in multiple bonds of various maturities. For example: 2, 4, 6, 8, and 10 years. It’s a really simple strategy to plan your cashflow needs and also to manage the interest rate risk. If rates rise, the maturities from shorter maturities can be reinvested at higher rates. Similarly, if rates fall, you’ll have gains on the longer maturities.

In case you weren’t aware, Edelweiss now has Bharat Bond ETFs of various maturities, using which you can essentially build a bond ladder:

Index only portfolio

The other advantage is for index fund investors. With Bharat bond ETFs, you can now build a pure index only portfolio.

Let me know if you guys have any questions.


If the yield is 6.87% on maturity at 2031, does this translate to interest rate of 5.25% p.a where interest is compounded on a quarterly basis at a Bank.

Yes Bank gives 6.25% pa for 10 year FD where interest is compounded on a quarterly basis. Effective yield will be 8.59%
Equitas Small Savings Bank gives rate of 6% for 10 years where interest is compounded on a quarterly basis. Effective yield 8.14%.

I personally would do laddering at these yield than what is shown above.

Bharat Bond and FD have their own tax implication, hence it depends on each individual.

I am told NRI can invest. Is NRI investments tax free or same rules apply and is the funds repatriable?

Nope intrest rate is 6.87%, most likely compounded annually.

Refer below snapshot from Edelweiss to understand what number might look like at end of 10 years

Again this number is indicative, not guaranteed.

@Bhuvan in last tranche, while applying for ETF through Zerodha, charging of stamp duty was not built in calculation. This resulted in short delivery and unnecessary refunds.
Not sure it was because of Zerodha or Edelweiss. But can it be taken care of this time around?

Yep, teething troubles last time given the initial implementation and there was some confusion.


Holding this ETF is just like a bond, and the yield of the ETF is 6.87%. Not sure what interest rate you’re talking about.

how to apply.
i dont see it in coin.

Links :point_up_2:

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As per Edelweiss. The maturity value gross is 198 847. This translates to a yield of 9.88%.
The post tax value is 189508. This translates to a yield of 8.95%.

Tenor 10 years.

How is the 6.37% arrived at as Net Post Tax Return.


When I compare investing in this product vs similar product with similar risk i.e Bank FD - Which product gives me a better return.

If the yield of this product is 6.87% after 10 years. This yield is equivalent to interest rate/coupon of 5.25% where interest is compounded quarterly.

You seem to be using some wrong formulas or have understood things incorrectly.

First, here are the numbers pre-taxes.

Here are the numbers for Yes FD with quarterly compounding

Years Opening Balance Interest Earned Closing Balance
1 ₹ 1,00,000 ₹ 6,398 ₹ 1,06,398
2 ₹ 1,06,398 ₹ 6,807 ₹ 1,13,205
3 ₹ 1,13,205 ₹ 7,243 ₹ 1,20,448
4 ₹ 1,20,448 ₹ 7,707 ₹ 1,28,155
5 ₹ 1,28,155 ₹ 8,199 ₹ 1,36,354
6 ₹ 1,36,354 ₹ 8,724 ₹ 1,45,078
7 ₹ 1,45,078 ₹ 9,282 ₹ 1,54,360
8 ₹ 1,54,360 ₹ 9,876 ₹ 1,64,236
9 ₹ 1,64,236 ₹ 10,508 ₹ 1,74,744
10 ₹ 1,74,744 ₹ 11,180 ₹ 1,85,924

Here’s Bharat Bond with annual compounding

Years Opening Balance Interest Earned Closing Balance
1 ₹ 1,00,000 ₹ 6,870 ₹ 1,06,870
2 ₹ 1,06,870 ₹ 7,342 ₹ 1,14,212
3 ₹ 1,14,212 ₹ 7,846 ₹ 1,22,058
4 ₹ 1,22,058 ₹ 8,386 ₹ 1,30,444
5 ₹ 1,30,444 ₹ 8,961 ₹ 1,39,405
6 ₹ 1,39,405 ₹ 9,577 ₹ 1,48,982
7 ₹ 1,48,982 ₹ 10,235 ₹ 1,59,217
8 ₹ 1,59,217 ₹ 10,939 ₹ 1,70,156
9 ₹ 1,70,156 ₹ 11,689 ₹ 1,81,845
10 ₹ 1,81,845 ₹ 12,493 ₹ 1,94,338

Now, the FD interest rate is 6.25%. If annualize the returns, it’s 6.4%

Now, in an environment where a 10-year govt bond is giving you 6.3%, how can an FD give 8%?


Given how terribly tax inefficient FD is Bharat bond wins hands down becauase of the tax advantage.


I am very clear on the concept of yield.

As per your calculation with Yes Bank. What is the final interest amount the product is giving = 85,924 on a principal of 100,000. So what is the yield. 85,924/100,000 * 100 = 85.92 . This divided by 10 years gives a yield of 8.5% for this FD. This is yield on this FD prior to tax.

The definition of Yield is
To know the yield on the interest that you will earn from FD, the total return earned on investment has to be divided by number of invested years and then get the annualized effective yield.

Conclusion: Do not wish to continue with this topic, as I am very sure of the definition of yield. If anyone else has any other view, so be it.

This ETF does bring a much-needed hope that from here one we might start receiving index oriented debt products. I have only seen liquid bees which is the only index debt instrument, but this one is also good for building a complete index oriented product,

There are multiple ways of calculating yield, especially for long tenure bonds. Most number published uses Internal rate of Return (IRR) as yield, which considers time value of money in account.

Without getting into definition of yield,
if you are considering simple intrest accumulated over 10 year period it should be around 9.4%, IRR would be 6.87%

On post tax basis, respective number would be approx 8.9% and 6.37%

So post tax basis, it is much more favorable then any bank FD

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@SMIFS_LIMITED , very Ironic this is just debt related fund , but not an debt fund .

coz we cannot use it as margin under liquid category and comes only under equity category hence we can utilise only 50% that too after haircut of 8%.

Liquidbees is not an index based product. It is pure debt ETF, does not follow any index.

Apart from Bharat bond ETF, multiple other index based debt funds are available. Especially in last quarter or so multiple SDL+PSU index funds are launched, so options are now available.
Most of these are index funds (as against ETF) but for debt product that isn’t much of a difference.

Is it available for collateral, if yes whether it is treated as cash equivalent ?

It will be available for pledging once listed on the exchanges and approved for pledging by the Clearing Corporation. Bharat Bond ETFs are treated as non-cash component.


Is there anything in your eyes, which is better than liquid mutual fund (returns point of view), which is treated as cash component.

Go for money market funds. You may get slightly higher returns.

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