A Closer Look at India ETFs
January 30th 2013 at 11:25am by Tom Lydon
India’s stock market and related exchange traded funds are garnering more attention as investors look at the country’s rising middle class, relatively stable economic and political environment and cheaper rupee.
For instance, foreign institutional investments funneled $20 billion into India’s markets over 2012, the second highest calendar year inflow since 1993, writes Nathaniel Matherson for The Motley Fool. Global quantitative easing measures helped push more money into the emerging markets, and with continued quantitative easing, institutional investments may not end anytime soon. [India ETFs Lead Emerging Markets in Early 2013]
Investors who are interested in gaining access to India can take a look at a number of India related ETFs.
The EGShares India Infrastructure Fund (NYSEArca: INXX) is an interesting play as India is expected to spend $1 trillion in infrastructure projects over the next five years. INXX tries to reflect the performance of the Indxx India Infrastructure Index. Sub-sector allocations include industrials 36.3%, utilities 26.2%, basic materials 13.6%, telecom 10.1%, financials 7.3%, oil & gas 5.0% and consumer services 1.5%.
The EGShares India Consumer Fund (NYSEArca: INCO) offers exposure to India’s consumer sector. Potential investors should be aware that India’s annual consumer price inflation is above 10% and food prices are rising, which would pressure middle class spending. Nevertheless, income growth should help the sector in the years to come. INCO’s sub-sector allocations include personal goods 21.2%, food producers 18.1%, beverages 13.6%, mdia 13.2%, industrial engineering 8.9%, automobiles 8.5%, travel & leisure 7.6%, tobacco 5.4%, leisure goods 1.6%, general retalers 1.0% and household goods/construction 1.0%.
The iShares S&P India Nifty 50 Index Fund (NYSEArca: INDY) captures the large-cap market, holding the largest 50 Indian stocks by market-cap. Potential investors should know that the current price-to-earnings is a little high at 29.6 and volatile relative to the S&P 500. The ETF’s sector allocations include banks 20.9%, software 12.6%, refineries 8.6%, cigarettes 8.3%, housing 6.6%, pharmaceutical 4.9%, engineering 4.4%, oil exploration 4.1%, passenger vehicles 3.2% and commercial vehicles 3.0%.
For small-cap exposure, the iShares MSCI India Small Cap Index (NYSEArca: SMIN) tries to reflect the performance of the MSCI India Small Cap Index and includes 141 small-cap companies. Sector allocations include financials 28.3%, consumer discretionary 15.4%, industrials 14.5%, materials 10.9%, health care 9.7%, consumer staples 8.1%, utilities 5.8%, information technology 5.8% and energy 1.4%. Looking at valuations, SMIN is cheaper than the large-caps at a 24.39 price-to-earnings.
For more information on India, visit our India category.
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.