The iShares India 50 ETF (NASDAQ: INDY) and the iShares MSCI India ETF (CBOE: INDA) are two big India ETFs trading in the U.S. with positive outlook. In recent years, India’s government has taken steps to liberalize its financial markets and reduce government subsidies.
The emerging markets investment landscape is broad, encompassing dozens of countries of varying market sizes. India is one of the largest developing economies and one of the most accessible via exchange traded funds.
“The progress India has made in cutting back costly government subsidies on items such as fuel is a prime example of the advances being made in structural reforms under Prime Minister Narendra Modi. Subsidies as a percentage of gross domestic product (GDP) have declined in recent years,” said BlackRock in a new research piece.
The $5.19 billion INDA follows the MSCI India Index and holds 80 stocks. INDA allocates 23.4% of its weight to financial services stocks and about 29% of its combined weight to technology and energy stocks. The ETF is off 7% this year.
“The government has also taken steps to plug leaks in the system by paying out subsidies directly, via bank accounts, rather than through agents or intermediaries,” according to BlackRock. “Measures aimed at increasing financial penetration and bringing swathes of the informal economy into the formal economy are supportive of long-term growth, in our view.”
Indian Government Tackles Bureaucratic Barriers
The $1.14 billion INDY follows the Nifty 50 Index, but actually holds 53 stocks. Although INDY is slightly more volatile than the aforementioned INDA, the former is down 6% this year. INDY allocates 35.7% of its weight to financial services stocks. The technology and energy sectors combine for over a quarter of the fund’s weight.
“The Indian government is tackling chronic low productivity, bad loans in the banking system and the bureaucratic barriers hampering the private sector,” said BlackRock. “Financial sector reform is particularly encouraging. A government-led capital injection into banks has helped to repair balance sheets. The clean-up of non-performing loans and banking sector recapitalization are clearing the path for private sector investments and a long-awaited capex recovery. Corporate earnings in India are looking up again, with analysts expecting 2018 earnings growth in the area of 21%.”
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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.