Thanks to election fever, Indian markets are hitting fresh
highs. The BSE Sensex breached the 22,000 threshold while the
National Stock Exchange index - Nifty - is hovering close to 6,600.
The strong rally is mainly driven by consistent incredible foreign
fund inflows on optimism over the new government to turnaround the
beleaguered economy that outweighs the negative global sentiments
stemming from the continued Fed taper, soft economic data in China
and geopolitical tensions in Europe.
Notably, foreign investors have pumped in around 73,235 crore
rupees ($2.6 billion) in the stock market so far this year, making
it the fourth highest inflow after injecting 1.4 lakh crore rupees
in 2013 and 1.1 lakh crore rupees in 2010 and 2011 each.
Further, overall fundamentals are improving for the Indian economy.
Current account deficit is narrowing, fiscal deficit is under
control, inflation has been trending down, and rupee has stabilized
India ETFs Surging: Can This Trend Continue?
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. Rupee is currently hovering
around 60.50 against the greenback, representing the highest level
in eight months. Moreover, the geopolitical tensions in Russia,
slowdown in China and turmoil in other emerging nations are
boosting investor confidence and encouraging them to invest in the
recovering Indian economy.
The bullish trend in Indian market and its currency is likely to
continue until the election results on the expectation of a strong
growth-oriented government post elections and the domestic factors,
which are stimulating growth in Asia's third-largest economy.
Investors seeking to ride out this optimism could play with the
Indian ETFs with a lower risk. While there are several options in
the space, the following four ETFs are leading the space higher,
gaining double-digits over the past one month. Any of these
products could be an intriguing choice for investors at least for
the near term (see:
all the emerging Asia Pacific ETFs here
EGShares Indxx India Small Cap Fund (
This fund provides exposure to the small cap segment of the broad
Indian equity market by tracking the Indxx India Small Cap Index.
Holding 56 securities, the product is widely spread out across each
security as none of these holds more than 3.3% of assets. From a
sector look, financials make up for one-third of the portfolio
while industrials and consumer discretionary get double-digit
allocation in the basket.
The ETF is unpopular and illiquid with AUM of $15.6 million and
average daily volume of about 14,000 shares. The fund charges 85
bps in fees per year and added nearly 10% in the past one month.
SCIN has a Zacks ETF Rank of 2 or 'Buy' rating (read:
3 Small Cap ETFs Surging in the Past Month
WisdomTree India Earnings Fund (
This product tracks the WisdomTree India Earnings Index and is
tilted toward large cap stocks. In total, the fund holds 169
securities with the largest allocation going to Reliance Industries
and Infosys that account for 8.67% and 7.21% share, respectively.
The ETF is heavy on financials with one-fourth share, followed by
energy (19.27%), information technology (14.76%) and industrials
EPI is the largest and most popular ETF targeting India with AUM of
$884.3 million and average trading volume of more than 4.1 million
shares. Expense ratio came in at 0.83%. The fund gained nearly 11%
over the past month and has a decent Zacks ETF Rank of 3 or 'Hold'
iShares India 50 ETF (
This ETF is also a large cap centric fund and 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 23% of assets. With
respect to sector holdings, banks and software take the top two
spots at 20.8% and 15.7%, respectively, while others make up for
single-digit allocations (read:
3 Financial ETFs to Play the Bank Stress Tests
The ETF has amassed $477.6 million and trades in volume of nearly
160,000 million shares a day, suggesting some extra cost in the
form of tight bid/ask spread beyond the expense ratio of 0.93%.
INDY is up over 10.5% in the trailing one-month period and has a
Zacks ETF Rank of 3 or 'Hold' rating.
EGShares India Infrastructure Index Fund (
This fund provides 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, Larsen & Tubro and Tata Steel with
a combined 20% share. From a sector look, industrials take the top
spot with 38%, closely followed by utilities (26%), basic materials
(17%) and telecom (11%).
The fund has accumulated just $16.6 million in its asset base and
trades in small volume of 10,0000 shares a day on average. Expense
ratio came in at 0.85%. Though INXX is unpopular, illiquid and
expensive, it is leading the space higher gaining about 15% in the
past one month. The ETF has a Zacks ETF Rank of 3 or 'Hold' rating.
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 outperformance will continue based on
post-election boom and improving domestic fundamentals. Investors
should not miss this opportunity of grabbing the surging sentiments
with any of the above-mentioned products.
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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
EMERG-GS INDIA (SCIN): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
VANGD-FTSE EM (VWO): ETF Research Reports
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