Investors are confident that Prime Minister of India, Narendra Modi’s party (Bhartiya Janta Party) will emerge victorious in the Uttar Pradesh elections, a key state election. So they see little to no need for hedging away the risk.
The NSE Nifty 50 index has been recovering, after the November cash ban (
Demonetization), and is close to an all-time high.
The cost of bearish bets versus bullish wagers is lowest since October, which indicates that demand to hedge away the losses has decreased significantly, which shows the bullish sentiment of the investing world (read:
4 Emerging Market ETFs Poised to Be Great Buys).
There’s growing optimism that if BJP wins this key election in a state with approximately 200 million people, it will help the Prime Minister to score a second term in the General Elections in 2019 as it will boost the position of the party in the upper house.
This fund offers exposure to the Indian economy by weighting securities by earnings instead of market capitalization. It is a good bet for investors looking to overweight equities from the third largest economy of Asia.
It is a relatively costly bet with an expense ratio of 83 bps a year and has a volume of around 1.96 million shares a day. The fund manages AUM of $1.47 billion and bears concentration risk with around 40.73% allocated to the top 10 holdings. It has generated a return of 13.37% in the year-to-date timeframe and 23.32% in the past one year. EPI currently has a Zacks Rank #2 (Buy) with a Medium risk outlook.
This fund offers exposure to the 50 largest companies in the emerging market nation and hence is a more liquid bet. It is a purely large cap fund.
It is a relatively costly bet with an expense ratio of 94 bps a year and has a volume of around 94000 shares a day. The fund manages AUM of $801.7 million and bears concentration risk with around 49.33% allocated to the top 10 holdings. It has returned 12.25% in the year-to-date timeframe and 19.04% in the past one year. INDY currently has a Zacks Rank #2 with a Medium risk outlook.
iPath MSCI India Index ETN (
This fund offers a unique way to gain exposure to Indian equities. INP is an exchange traded note. Despite the credit risk involved, it significantly reduces tracking error, which is a major concern for investors investing in Indian equities, which can at times exhibit significant volatility.
It is a costly bet with an expense ratio of 89 bps a year owing to a paltry volume of 5350 shares a day. The fund manages AUM of $205.9 million. It has returned 13.19% in the year-to-date timeframe and 16.43% in the past one year. INP has a Zacks Rank #2 with a Medium risk outlook.
This fund is a good bet for investors looking to reduce the volatility impact by investing only in large cap securities.
This is the cheapest ETF offering exposure to the Indian markets with an expense ratio of 68 bps a year and has a volume of around 2.5 million shares a day. The fund manages AUM of $4.21 billion and bears concentration risk with around 44.91% allocated to the top 10 holdings. It has returned 11.67% in the year-to-date timeframe and 15.06% in the past one year. INDA currently has a Zacks Rank #2 with a Medium risk outlook.
Bottom Line:
Investors seem to be really bullish on the Indian economy as evident from the lack of hedges and the Nifty nearing the all-time high level it reached in March 2015. The impact of the cash ban seems to be mitigating and it is thus a good time to enter the markets.
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India ETFs in Focus as Modi Raises Optimism