India ETFs Outperforming

Indian equity markets are booming, and aren’t showing any signs of slowing down. The surprise rate cut executed by the Chinese central bank in order to fight its slowing growth, as well as the European Central Bank president Mario Draghi’s commitment to its stimulus package has provided the Indian economy with plenty of fuel to pull away from the other BRICS countries (Brazil, Russia, India, China, and South Africa).

The slowing of the economies China and the Eurozone helped India’s major indices, the Sensex and Nifty to hit new highs last week. This bolstered the hope that the Reserve Bank of India (RBI) will ease monetary policy before its review on December 2^nd, in order to trigger more economic growth.

Highlighted below are a number of ETFs that have benefited from India’s recent boom and may continue to if the RBI decides to ease its monetary policy. 

The iPath MSCI India Index ETN INP follows 76 publically traded Indian companies across ten sectors. The most heavily weighted sectors are information technology at 22 percent, financials at 19 percent, and energy at 12 percent. The top individual holdings include Infosys Ltd INFY with an 11.5 percent holding, Housing Development Finance making up 9.2 percent, Reliance Industries Ltd coming in at 7.3 percent. INP is up 30 percent year to date and up 10 percent over the last six months. The ETN has a yearly fee of 0.89 percent.

The Wisdom Tree India Earnings ETF EPI measures the performance of companies incorporated and traded in India that are profitable and are eligible to be purchased by foreign investors.  EPI consists of 220 companies across 10 sectors. Financials, information technology, and energy are the most heavily weighted sectors, similar to INP. The top three holdings are the sanm as INP with different weights; Reliance Industries Ltd coming in at 8.3 percent, INFY with an 8.1 percent holding, Housing Development Finance making up 6.8 percent of the ETF. EPI is up 33 percent year to date and 6 percent over the last six months. The ETF has an expense ratio of 0.83 percent.

The EG Shares India Consumer ETF INCO consists of 30 publically traded companies in the consumer industry in India. Consumer goods is the most weighted sector at 79 percent followed by Industrials at 15 percent. The top individual holdings include MRF Ltd at 6 percent, Motherson Sumi Systems Ltd making up 5.8 percent of the ETF, and Bosch Ltd also at 5.8 percent. INCO is up 47 percent year to date and 23 percent over the last six months. The ETF has an expense ratio of 0.89 percent.

The India Small-Cap Index ETF SCIF provides exposure to 102 small-cap Indian companies across ten sectors. The most heavily weighted sectors are the financials at 27 percent, consumer discretionary at 22 percent, and the industrials at 14 percent. The top individual holdings include Arvind Ltd making up 3.6 percent of the ETF, Vakrangee Software Ltd with a 2.9 percent holding, and Unitech Ltd coming in at 2.9 percent as well. SCIF is up 49 percent year to date and 4 percent over the last six months. The ETF has an expense ratio of 0.93 percent.

It is unclear whether the RBI will cut rates in its next policy review. However India is currently well positioned to continue to outperform under the new rule of president Modi and with gas prices falling regardless of what the RBI decides.