The rapid expansion of India’s market for exchange traded funds highlights the global growth of ETFs.
Although there are more than 1,300 exchange traded products listed in the U.S., the business is also expanding in other markets.
“The number of ETFs globally is growing faster than the U.S.,” said David Abner, director of institutional ETF sales and trading at WisdomTree, at the recent Morningstar ETF Invest Conference. “Foreign markets are clamoring for ETFs. We’re not anywhere near saturation.”
India’s capital markets regulator is clearing ETF products faster than other fund types as ETF assets in India continue to grow, report Anirudh Laskkar and Vyas Mohan for livemint.com. It has cleared at least 21 foreign run ETFs this year, compared to only a handful in prior years. [India ETFs Join Risk-On Rally]
“In fact, the regulator has clearly indicated that it’s more comfortable with broad-based foreign money (coming in through ETFs) as the identities of the investors are clearly indicated,” Naveen Kumar, managing director, INDXX Capital Management Services Pvt. Ltd, commented. “ETFs mostly bring in retail money to invest in stocks or indices listed on the exchanges. So, the money coming through ETFs is more transparent in nature.”
India domestic fund houses, Birla Sun Life Mutual Fund and Kotak Mutual Fund, are also want to get into the ETF business. Currently, most ETFs launched by Indian fund firms are based on gold and stock indexes.
Foreign institutional investors have been seeking direct investments in emerging markets, including India, and an increasing amount of cash is finding its way into ETFs in the country. India’s benchmark equity indices are down 20% year-to-date, but assets under the eight India-dedicated foreign ETFs have been holding up at $3 billion over the year.
“ETFs constitute nearly 7% of the total FII assets in India and by next year this should go up to 9-10%, considering other factors (are) constant,” Kumar added.
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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.