India seems to be back on track with the major indices at record
highs after a slowdown in 2013. The BSE Sensex breached the 22,000
threshold while the National Stock Exchange index - Nifty - soared
to a lifetime high of over 6,540. This is primarily thanks to
strong buying from foreign investors, slew of positive data and a
more stable rupee.
Among the so-called fragile five economies that were affected the
most by Fed tapering and foreign investment outflows due to their
large current account deficits, India has emerged as the strongest
country after Indonesia this year (read:
How Did Indonesia Avoid the Emerging Market ETF
Upbeat Data Fuels Rally
According to the recent data from RBI, foreign direct investment
was more than double at $6.1 billion in the third quarter of fiscal
2014. In fact, foreign investors made their biggest daily purchases
since December 6, on Friday for 25.77 billion rupees ($420.73
million). This represents the 16th consecutive buying session for a
total of about $1.4 billion.
India's current account deficit narrowed to a four-year low of $4.2
billion (0.9% of GDP) in the third quarter of 2013-14 from $5.2
billion (or 1.2% of GDP) in the second quarter buoyed primarily by
government curb on gold imports. India aims to restrict its current
account deficit at $45 billion at the end of fiscal 2013-2014, well
below the record high of $88 billion at the end of fiscal 2012-13.
After two quarters of deficit, the country's balance of payments
turned into surplus of $19.1 billion during the October-December
quarter. Trade deficit fell to $33.2 billion from $58.4 billion in
the year-ago quarter. Exports rose 7.5% while imports declined
Is the Worst Over for These Emerging Market
Moreover, the foreign exchange reserves was $294.36 billion as of
February end, up from $3.78 billion in the year-ago month. All
these data have spread optimism and confidence into Asia's third
largest economy at least for the near term, bolstering the Indian
rupee and prompting more foreign investments.
The Indian currency has shown strong resilience to the emerging
market turmoil this year and has appreciated nearly 12% from the
record low reached in late August. Many experts expect rupee to
continue its bull run ahead of the elections in early April.
Given improving fundamentals and encouraging data, Indian ETFs have
been spiking, gaining over 5% in the past five trading sessions.
Below, we have highlighted three ETFs that have performed strongly
in the recent rally and are poised to move higher given the
optimism about the possible change in the Indian government.
Any of these could be an excellent choice for investors seeking to
ride out the current surge and bullish outlook on the Indian
market. The three products have a decent Zacks ETF Rank of 3 or
'Hold' rating (see:
all the emerging Asia Pacific ETFs here
EGShares India Infrastructure Index Fund (
This ETF provide exposure to the growing infrastructure corner of
the broad Indian market by tracking the Indxx India Infrastructure
Index. Holding 30 stocks in its basket, the fund allocates higher
to Bharat Heavy Electrical, Tata Steel and Larsen & Tubro with
a combined 20% share.
From a sector look, industrials take the top spot with over 41%,
closely followed by utilities (nearly 22%), basic materials (12%)
and telecom (12%). The product is unpopular and illiquid with AUM
of $15.2 million and average trading volume of about 16,000 shares.
Further, the fund charges a higher fee of 85 bps per year and
gained over 7% in the past five days.
iShares India 50 ETF (
This fund follows the CNX Nifty Index, which seeks to track the
performance of the largest 50 Indian stocks. ITC, Infosys and
Reliance Industries occupy the top three positions in the basket
with a combined 24% of assets. The product is widely spread out
across number of sectors with banks (20.06%), software (17.31%) and
cigarettes (8.72%) taking the top three spots.
The ETF has amassed $449.1 million and trades in volume of nearly
165,000 million shares a day, suggesting some extra cost in the
form of tight bid/ask spread beyond the expense ratio of 0.93%.
INDY added nearly 5.2% over the past five trading sessions (read:
India ETF in Focus on Recent Rate Hike
WisdomTree India Earnings Fund (
This product tracks the WisdomTree India Earnings Index, holding
169 securities in its basket. The fund is heavy on financials with
one-fourth share, while energy, information technology and
industrials get double-digit allocation in the basket. Reliance
Industries, Infosys and Oil & Natural Gas are the top three
holdings with a combined 22% of assets.
EPI is the largest and most popular ETF targeting India with AUM of
$841.3 million and average trading volume of more than 4.3 million
shares. Expense ratio came in at 0.83%. The fund was up over 5%
over the past week.
These products are clearly outpacing the broad U.S. market fund (
), emerging Asia Pacific fund (
) and the broad emerging market fund (
) by wide margins. This trend is likely to continue at least for
the near term given the promising trends, improving economy and a
bullish outlook for post-election boom.
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WISDMTR-IN EARN (EPI): ETF Research Reports
SPDR-SP EM ASIA (GMF): ETF Research Reports
ISHARS-SP INDIA (INDY): ETF Research Reports
EMERG-GS IIIIF (INXX): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
VANGD-FTSE EM (VWO): ETF Research Reports
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