Indian economy seems to be finally bottoming out, as a result of
several reforms by the government and strong corporate earnings. (
India ETFs: Getting Back On Track? )
The government has recently introduced various reforms and
encouraged foreign direct investment in the country. The government
granted permission to foreign supermarket chains to set up shop in
India, gave consent to foreign airlines to procure stakes in local
carriers, and lifted the state-regulated prices of some fuels.
Also, the rate cuts by RBI, or the Reserve Bank of India, in
order to infuse liquidity in the economy played a positive role in
driving the price of the ETFs . The bank
howver cautioned that future cut in rates is only possible if
inflation and current account deficit show an improvement. ( India ETFs after Central Bank Rate Cut )
According to the government, the economy will grow between
6.1% and 6.7% in the fiscal year starting April 1, after an
estimated 5.5% growth for the current year-its slowest growth rate
in a decade. A recent report by the Moody's projects the economy to
grow at ~7% from 2014 onwards.
That being said, the Indian economy cannot be expected to revert
to 8-9% growth recorded in the last decade.
Poor infrastructure development, a high level of interest rate
to tackle increasing inflation and elevated current and fiscal
deficit appear to be main roadblocks in the growth of the
With that being said, for investors having a bullish stance on
the Indian economy hoping that the economy may improve and post
healthy growth going forward, here we would highlight the Zacks top
ranked ETF providing exposure to the Indian market.
PowerShares India Portfolio (PIN) is ranked Zacks Rank 2 or Buy
and we expect it to outperform its peers in a timeframe of one year
meaning it could be an excellent pick for investors seeking more
exposure to this economy. ( Zacks Top Ranked India ETF in Focus: INDY )
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in the
context of our outlook for the underlying industry, sector, style
box, or asset class. Our proprietary methodology also takes into
account the risk preferences of investors. ETFs are ranked on a
scale of 1 (Strong Buy) to 5 (Strong Sell) while they also receive
one of three risk ratings, namely, Low, Medium, or High.
The aim of our models is to select the best ETFs within each
risk category. We assign each ETF one of five ranks within each
risk bucket. Thus, the Zacks Rank reflects the expected return of
an ETF relative to other products with a similar level of risk.
For investors seeking to apply this methodology to their
portfolio in Indian ETF, we have taken a closer look at the top
ranked PIN below:
PowerShares India Portfolio ( PIN
Launched in May 2008, PowerShares' PIN is a passively managed
exchange traded fund designed to track the Indus India Index. The
Index is designed to replicate the Indian equity markets as a
whole, through a group of 50 Indian stocks selected from a universe
of the largest companies listed on two major Indian exchanges.
The fund has been designed to provide exposure to 50 Indian
securities. The fund since its inception has built an asset base of
$399.3 million but is not liquid as indicated by its trading volume
level of more than 0.6 million shares a day.
PIN provides an opportunity for diversification since the ETF is
not strongly correlated with the S&P 500 index as indicated by
an R-Squared value of 44.58% ( Do Country ETFs Really Provide Diversification?
The fund offers a concentrated bet in the top ten holdings as
indicated by its 56.7% exposure to these holdings. Among individual
holdings, Infosys, Reliance and Oil & Natural Gas form the top
line of the fund with total investment of 28.7%.
The fund allocates 60% of its asset base to Energy, Financials
and Information Technology. A small proportion of the asset base
has also been assigned to Consumer Staples, Materials, Health Care,
Industrials, Telecommunication Services and Utilities.
The fund charges a fee of 79 basis points from investors and has
returned 13.52% in 2012. In the year-to-date period its gain stands
PIN has hit a low of $15.44 and a 52-week high of $20.92. The
fund is currently hovering near its 52-week high price and could be
an interesting 2013 choice for investors seeking more emerging
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