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Does Investing In An India ETF Make Sense?


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Does An Investment In An India ETF Make Sense Right Now?

India ETF
The India stock markets and India Exchange Traded Funds (ETFs) are currently at a low point due to a slowdown in economic growth in India, which makes buying an India ETF an enticing option for value investors.  Many economists that follow the Indian economy believe this economic slowdown will be short lived, which means buying an India ETF might make a lot of sense right now in anticipation of a recovery in the Indian economy.

India is the second most populated country in the world, with hundreds of millions of people trying to move up from poverty into a middle class lifestyle.  This movement towards higher standards of living in India has fueled a great deal of economic growth in the Indian economy in recent years.  Although the Indian economy has slowed in 2012, along with the other BRIC countries (Brazil, Russia, India, and China), forward looking projections are for economic growth to pick up in India in coming years, which in turn should cause an increase in India stocks and any India ETF that tracks India stocks.

Choosing An India ETF and The Risks Associated With Investing In India

There are a number of India ETFs to choose from to make an ETF investment in India via an India ETF.  Some of the funds featured below are Exchange Traded Notes (ETNs) rather than ETFs, but trade in a similar manner as ETFs.  The following are some of the more widely traded Indian ETFs and ETNs.

  • iPath MSCI India Index ETN (NYSE:  INP) is the most widely traded Indian ETF.  INP seeks returns that reflect the returns of the MSCI India Total Return Index that is comprised of the top sixty-eight companies, by market capitalization, that are listed on the National Stock Exchange of India.
  • WisdomTree India Earnings (NYSE:  EPI) is an Indian ETF that seeks returns that reflect the returns of the WisdomTree India Earnings Index that is comprised of companies of all market cap sizes that are listed on stock exchanges in India.
  • PowerShares India (NYSE:  PIN) is an Indian ETF that seeks returns that reflect the returns of the Indus India Index that is comprised of fifty companies that are listed on major stock exchanges in India.  PIN invests in Indian stocks and Global Depositary Receipts (GDRs) or American Depositary Receipt (ADRs) that represent holdings of stocks that trade in India and comprise the tracking index.
  • iShares S&P India Index Fund (NYSE:  INDY) is an Indian ETF that seeks returns that reflect the returns of the S&P CNX Nifty Index that is comprised of the fifty largest companies listed on the India National Stock Exchange by market capitalization.  INDY offers broad exposure to the Indian economy.

Investing in an India ETF is not without risks.  If the current slump in the Indian economy continues or worsens, then India ETFs could fall in value.  The Indian currency, the Indian Rupee, has lost a great deal of value versus the United States Dollar in recent years, and additional depreciation of the Indian rupee could affect the Indian economy and the performance of Indian company’s shares and India ETFs that derive their value based on the price of those shares.  These are considerable investment risks; however, with so many people in India trying to improve their standard of living, it is likely that strong growth in the Indian economy should continue in the coming years and decades, which could cause a nice appreciation in an India ETF that is purchased while the Indian economy and stock markets are down.

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