Year-to-date, the WisdomTree India Earnings Fund (NYSEArca: EPI) and the PowerShares India Portfolio (NYSEArca: PIN), two of the largest India ETFs, have easily outperformed Brazil and Russia equivalents. The iShares India 50 ETF (NasdaqGM: INDY), a proxy for India’s CNX Nifty Index, which is home to India’s 50 largest stocks, has also been solid by comparison to other emerging markets country-specific ETFs.
Earlier this year, Indian stocks and ETFs were helped by a controversial update to India’s official GDP-estimation methodology, which could have bolstered recent readings by over two percentage points. Slack earnings and uncertainty regarding taxes on foreign investors are among the issues that have recently hindered Indian stocks. [Living Large With a Leveraged India ETF]
Last year, Indian equities and the aforementioned ETFs were buoyed by the landslide victory for Hindu nationalist Narendra Modi in the country’s national elections. In 2015, other factors are supporting India ETFs, including low oil prices (India is a net importer of crude) and accomodative monetary policy from the Reserve Bank of India.
The bottom line is that compared to other emerging markets ETFs, particularly the other members of the BRIC group, India funds have been decent-by-comparison this year and that strength could translate to some legitimate upside for patient investors.
“UBS last week lowered its year-end target for the Nifty Index, a key gauge of Indian shares, to 8200, a mere 5% upside. Even at that level, UBS has priced in a handsome 17 times forward earnings valuation, on the back of 8% earnings growth for the fiscal year ending next March and 15% the year after,” reports Shuli Ren for Barron’s.
While foreign institutional investors yanked $2.6 billion from Indian stocks in August, one of the largest single month outflows since the global financial crisis, fund managers with a global scope still significantly raised their allocation to Indian stocks in recent months.
For instance, the average global emerging market fund increased India allocation to 10.7% at the end of July, or a 40% rise from typical exposures at the start of 2014, according to EPFR Global. [A Sturdy Emerging Market]
The international Monetary Fund projects India’s economy to expand 7.5% in the year ending March 31, 2016, outpacing China’s growth for the first time in over a decade. In comparison, China’s economy is expected to grow 6.8% this calendar year while Brazil and Russia could contract 1.5% and 3.4%, respectively.
iShares India 50 ETF
