As a data and analytics company, VettaFi is aware what ETF topics are of greatest interest to investors, based on more than two million unique monthly visits to the VettaFi platform. In February, one of the top 10 most popular ETF lists was for India ETFs. Let’s review some of the larger ETFs and how they could potentially augment a pre-existing international equity allocation.
India is the third largest country in the most popular diversified emerging market ETFs behind China and Taiwan. For example, the iShares Core MSCI Emerging Markets ETF (IEMG) and the iShares MSCI Emerging Markets ETF (EEM) had 14% and 13%, respectively invested in India as of early March, while the Vanguard FTSE Emerging Markets ETF (VWO) had 16% in the market as of the end of January (latest available).
India’s 7% economic growth for the past year was faster than China ‘s for the first time since 2016. For advisors and end clients that believe India will continue to be a relatively strong performer and prefer to be overweighted to the country, there are a variety of U.S. listed funds to consider.
The iShares MSCI India ETF (INDA) is the largest with $4.6 billion in assets, aided by approximately $230 million of net inflows to start 2023. Relative to IEMG, INDA has a higher price-to-earnings ratio (23 vs. 11) and higher price-to-book ratio (3.5 vs. 1.7) based on data from iShares and different sector representation.
INDA has more exposure to financials (26% of assets vs. 20%) and energy (12% vs. 4.4%), and less exposure to information technology (16% vs. 20%) and consumer discretionary (10% vs. 13%).
The WisdomTree India Earnings Fund (EPI) recently had $775 million in assets after pulling in $40 million in the beginning of 2023. EPI takes a more fundamental approach than INDA, which is market-cap weighted. EPI’s index is constructed based on a company’s net income and only owns profitable companies. Based on data available on WisdomTree, EPI’s price-to earnings ratio is 13 and price-to-book ratio is 1.9.
Relative to INDA, EPI has more exposure to materials (24% of assets vs. 9.2%) with Tata Steel a top-10 position, and a larger energy stake (18% vs. 12%), with less exposure to financials (16% vs. 26%) and information technology (13% vs. 16%).
Meanwhile, the iShares India 50 ETF (INDY) has just under $600 million but gathered less than $10 million of new money in early 2023. INDY owns 51 stocks, less than half the 114 found inside INDA. INDY is more concentrated in financials (37% of assets) and has less exposure to materials (6.6%).
INDA has the lowest expense ratio of this trio of larger ETFs, with a 0.64% fee that is at least twenty basis points less than its peers. However, the Franklin FTSE India ETF (FLIN), which manages $100 million in assets, charges a miniscule 0.19% fee. FLIN takes a market-cap approach similar to INDA and can complement VWO well due to its similar use of a FTSE underlying benchmark.
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