Top Three ETFs For Investing In India

In 2014, the Modi-led government ushered a new wave of optimism in the Indian economy by ending a period of policy paralysis. During these last five years, there have been a number of policy initiatives and amendments -- the introduction of the goods and services tax, direct transfer of subsidies, liberalization of FDI, trade policies, make in India push, demonetization -- the benefits for some of which have been debatable as they resulted in short-term hit on the economic growth while others have been well-accepted.

India is now getting warmed up for the 2019 elections.

One thing that remains constant through these election cycles is the strength of its economy which makes the investing environment conducive. Here’s a look at the top Indian Exchange Traded Funds (ETFs) for the U.S. investors.

India is the only trillion-dollar economy to rank among the top five fastest growing economies in the world. Backed by strong macroeconomic fundamentals, fiscal discipline, high saving rates, robust domestic demand, and demographic trends, India’s economy is expected to clock an average annual growth of 7.4% in 2019 (IMF, WEO October 2018).

With exports contributing less than 20% to its GDP, India is primarily a domestic driven economy. India is currently the sixth largest economy in terms of nominal GDP. The IMF projects India’s 2.85 trillion (in 2018) to grow to $4.66 trillion by 2023 moving up one slot to become the fifth largest economy. In terms of GDP (Purchasing Power Parity), India is the third largest with a GDP (PPP) of $10.38 trillion which is expected to swell to $16.78 trillion by 2023.

The shift in consumer behavior and spending pattern in India has strengthened its consumption trend. The country is poised to be the third largest consumer market with consumption expected to reach $4 trillion by 2025, experiencing a three times increase in consumption expenditure according to a BCG report.

Morgan Stanley estimates that the market capitalization of Indian equities would be more than double in ten years, touching $6.1 trillion by 2027 from $2.3 trillion in 2017. Some of the top ETFs (in order of assets under management above $500 million and excluding inverse and leveraged ETFs) that give access to India are:

iShares MSCI India ETF (INDA)

iShares MSCI India ETF offers an exposure to around 75 Indian companies from the large-cap and mid-cap space. The ETF is heavily invested in sectors such as financials, information technology, energy, consumer staples and consumer discretionary—which together add up to 75.96% of the portfolio. Launched in 2012, the fund has $4.7 billion as assets under management which is the highest among Indian ETFs. The fund benchmarked against the MSCI India Index and has an expenses ratio of 0.68% with a beta of 1.08.

WisdomTree India Earnings Fund (EPI)

WisdomTree India Earnings Fund is a decade-old fund offering a diversified portfolio of 340 stocks across different market caps in the Indian stock market. With $1.43 billion as assets under management, the fund has a valuation-centric approach to investing. The fund is invested across eleven sectors with an emphasis on financial (23.69%), energy (18.16%), information technology (14.95%), materials (11.86%) and consumer discretionary (8.76%). Its top ten holdings constitute 39.91% of the portfolio.

iShares India 50 ETF (INDY)

iShares India 50 ETF is the third largest India-centric ETF in terms of assets under management. The fund provides a single window to the U.S. investors to the top 50 companies that constitute India’s prominent index—Nifty. With a beta of 1.14, the fund offers a concentrated bet in the Indian stock markets with a portfolio hovering around 50. The ETF is benchmarked against Nifty 50 index and has an expense ratio of 0.92%. With financial, information technology, energy, consumer staples and consumer discretionary as its top sector holdings, the fund broadly mirrors its underlying index. Reliance Industries Ltd, HDFC Bank Ltd, Housing Development Finance Co, Infosys Ltd, ITC Ltd, ICIC Bank Ltd, Tata Consultancy Services Ltd, Larsen and Toubro Ltd, Kotak Mahindra Bank Ltd and Hindustan Unilever Ltd are its top holdings.

Exchange Traded Funds offer a cheap and convenient medium with wide-spread choice to investors to diversify portfolios geographically. However, other than the ETFs, investors can invest in select Indian companies traded on the U.S. bourses as American Depository Receipts (ADRs), through region-specific mutual funds or as a Foreign Portfolio Investor (FPI). Whatever be the investment vehicle, India is one of the most promising investment destinations globally.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

INDA EPI INDY

Other Topics

World Markets