An ETF for India’s Small-Cap Companies

October 29th at 1:00am by Tom Lydon

ETF indiaIndia has been a fast-growing market for the last few years, and Van Eck is hoping that a small-cap exchange traded fund (ETF) it has in registration with give investors even more exposure to the nation.

Van Eck has registered with the Securities and Exchange Commission (SEC) for a new India small-cap ETF, reports Cinthia Murphy for IndexUniverse. The Market Vectors India Small-Cap ETF will seek to reflect the performance of the Market Vectors India Small-Cap Index. Potential investors should note that the fund will invest in the more volatile aspects of an already volatile equities market.

There are currently three ways to gain exposure to India’s economy: WisdomTree India Earnings Fund (NYSEArca: EPI), PowerShares India (NYSEArca: PIN) and iPath MSCI India Index (NYSEArca: INP). PIN and INP have exposure to large-caps; EPI has 20% weighted in mid-caps and the rest of its exposure is in large-caps.

India’s Finance Minister Pranab Mukherjee stated that the economy is recovery, albeit a slow one, according to RTTNews. The Prime Minister is for a rational interest rate policy moving along with fiscal measures to nurture the economy.

The Reserve Bank of India has adopted a soft monetary policy, issuing banking sector funds to aid the economy.

SBI Chairman O P Bhatt expects a 7% expansion in fiscal 2010, while RBI Professional forecasters revised their forecast downward to 6%, according to Outlook India. (Why India is moving up).

On the upside:

  • Companies will likely ask banks for working capital loans as the IPO market picks up, which would help revive the economy
  • The auto and infrastructure industries are seeing more demand
  • Industrial production is up
  • Business confidence is on the optimistic side
  • Stock markets are strong

On the downside:

  • Private consumption demand is slowing
  • The first quarter showed a decline in corporate sales
  • A weak monsoon season has hurt agricultural output
  • Credit growth is low
  • Exports have dipped
  • PowerShares India (NYSEArca: PIN): up 64.2% year-to-date

  • WisdomTree India Earnings (NYSEArca: EPI): up 78.7% year-to-date

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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