India is now the 7th largest economy in the world with a nominal GDP of $2.5 trillion. Additionally, with the IMF forecasting real GDP growth in 2017 and 2018 above 7%, it’s also the fastest growing large economy in the world.
Although nominal GDP growth doesn’t directly translate into stock returns, it is a good proxy for total revenue growth generated by India’s largest publicly listed companies. Additionally, in the long run corporate earnings growth can’t outstrip nominal GDP growth. Thus, it’s a fair assumption that earnings growth can be sustained at 10% (7% real GDP growth + 3% inflation) from a macro perspective. From a micro viewpoint many small and mid-cap companies will grow earnings at much higher rates than 10% for the foreseeable future. That’s why we believe in an active stock-picking approach. However, strong corporate earnings growth is one of the key foundations of the secular bull market in India.
The Columbia Indian Consumer ETF (INCO) aims to target growth, driven by demographics and consumer confidence, with an ETF that concentrates on companies in India’s growing consumer industry. This fund seeks investment results that correspond, before fees and expenses, to the price and yield performance of the Indxx India Consumer Index.
The Indxx India Consumer Index is a maximum 30-stock free-float adjusted market capitalization-weighted index designed to measure the market performance of companies in the consumer industry in India as defined by Indxx’s proprietary methodology. The index consists of common stocks listed on the primary exchange of India.
The fund has several key tenets that it uses in order to capitalize on returns. First the ETF attempts to capitalize on demographics. It does this by aiming to benefit from India’s growing population and economy. Second, the fund provides dedicated exposure to the consumer industry. It accomplishes this goal by investing in companies such as autos, food products, beverages, media and household products, which could benefit from India’s rising consumption of goods and services. Finally, INCO identifies growth opportunities driven by consumer confidence numbers. Analysts and managers focus on the potential growth in India, where consumer confidence, a gauge of how optimistic consumers feel about the economy, is higher than in most countries.
Top holdings in the fund include: 5.12%, 4.85%, 3.52%, 2.43%, 1.71%, 1.65%, 1.64%, and 1.34%.
For more market trends, visit ETFtrends.com.