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Consumer prices in India hit a record low. Data released on July 12, 2017 reflects that retail inflation for June slowed to 1.54% compared with 2.18% in May, a five-year low, primarily owing to lower food prices.
Industrial production growth also declined, growing 1.7% in May on a year-over-year basis compared with 2.8% in April.
These factors are raising hopes of a rate cut by the Reserve Bank of India (RBI) as early as next month. Since the inflation is well below RBI’s target of 4%, a rate cut is expected to spur consumer spending, thereby increasing inflation.
Economists feel that though food price deflation is a positive for consumers, it is expected to restrict growth in the economy. With above-average rainfall expected this season, a spike in production might lead to further decline in food prices. Low price growth will be stressful for farmers, thereby creating pressure on the country’s banking system with regard to farmer loans.
The Indian economy grew 6.1% in the January-March quarter of 2017, as businesses battled the shock of demonetization of high denomination currency notes in November 2016.
Most recently, prime minister Narendra Modi’s government introduced a major tax reform. From July 1, 2017, the Indian economy adopted a unified tax code, the Goods and Service Tax (GST). Economists predict that this is expected to bode well for the economy in the long run. However, short-run shocks are expected as businesses get accustomed to the new code (read: India to Unify Tax: Near-Term Pain/Long-Term Gain for ETFs).
Despite these headwinds, the long-run forecast for the Indian economy remains strong. Per a Bloomberg survey, analysts predict 7.3% growth for the economy in the 2018 fiscal.
This fund provides exposure to large and mid-sized Indian equities.
It has AUM of $5.19 billion and charges a fee of 71 basis points a year. Financials, Computer-Software and Consumer Discretionary are the top three sectors of the fund, with 22.75%, 13.66% and 12.61% allocation, respectively (as of July 11, 2017). Housing Development Finance Co, Reliance Industries Ltd and Infosys Ltd are the top three holdings of the fund, with 8.98%, 7.04% and 6.51% allocation, respectively (as of July 11, 2017). The fund has returned 15.42% in the last one year and 25.36% year to date (as of July 12, 2017). INDA currently has a Zacks ETF Rank 2 (Buy) with a Medium risk outlook (read: Why India ETFs are Soaring in 2017).
This fund provides exposure to Indian equities in multiple capitalization segments.
It has AUM of $1.71 billion and charges a fee of 84 basis points a year. Financials, Energy and Information Technology are the top three sectors of the fund, with 25.29%, 20.89% and 16.18% allocation, respectively (as of July 12, 2017). Reliance Industries Ltd, Infosys Ltd and Housing Development Finance Co are the top three holdings of the fund, with 11.65%, 6.61% and 6.28% allocation, respectively (as of July 12, 2017). The fund has returned 21.47% in the last one year and 27.43% year to date (as of July 12, 2017). EPI currently has a Zacks ETF Rank 2 with a Medium risk outlook (read: India ETFs: More Run Ahead?).
This fund provides exposure to large-cap Indian equities.
It has AUM of $1.04 billion and charges a fee of 94 basis points a year. Banks, Computer-Software and Refineries/Marketing are the top three sectors of the fund, with 26.09%, 11.06% and 8.77% allocation, respectively (as of July 11, 2017). ITC Ltd, Housing Development Finance Co and Reliance Industries Ltd are the top three holdings of the fund, with 7.63%, 7.12% and 6.76% allocation, respectively (as of July 11, 2017). The fund has returned 18.93% in the last one year and 28.24% year to date (as of July 12, 2017). INDY currently has a Zacks ETF Rank 2 with a Medium risk outlook.
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India Inflation at Record Low: ETFs in Focus
Consumer prices in India hit a record low. Data released on July 12, 2017 reflects that retail inflation for June slowed to 1.54% compared with 2.18% in May, a five-year low, primarily owing to lower food prices.
Industrial production growth also declined, growing 1.7% in May on a year-over-year basis compared with 2.8% in April.
These factors are raising hopes of a rate cut by the Reserve Bank of India (RBI) as early as next month. Since the inflation is well below RBI’s target of 4%, a rate cut is expected to spur consumer spending, thereby increasing inflation.
Economists feel that though food price deflation is a positive for consumers, it is expected to restrict growth in the economy. With above-average rainfall expected this season, a spike in production might lead to further decline in food prices. Low price growth will be stressful for farmers, thereby creating pressure on the country’s banking system with regard to farmer loans.
The Indian economy grew 6.1% in the January-March quarter of 2017, as businesses battled the shock of demonetization of high denomination currency notes in November 2016.
Most recently, prime minister Narendra Modi’s government introduced a major tax reform. From July 1, 2017, the Indian economy adopted a unified tax code, the Goods and Service Tax (GST). Economists predict that this is expected to bode well for the economy in the long run. However, short-run shocks are expected as businesses get accustomed to the new code (read: India to Unify Tax: Near-Term Pain/Long-Term Gain for ETFs).
Despite these headwinds, the long-run forecast for the Indian economy remains strong. Per a Bloomberg survey, analysts predict 7.3% growth for the economy in the 2018 fiscal.
Let us now discuss a few ETFs focused on providing exposure to the emerging market nation (see all Asia-Pacific (Emerging) ETFs here).
iShares MSCI India ETF (INDA - Free Report)
This fund provides exposure to large and mid-sized Indian equities.
It has AUM of $5.19 billion and charges a fee of 71 basis points a year. Financials, Computer-Software and Consumer Discretionary are the top three sectors of the fund, with 22.75%, 13.66% and 12.61% allocation, respectively (as of July 11, 2017). Housing Development Finance Co, Reliance Industries Ltd and Infosys Ltd are the top three holdings of the fund, with 8.98%, 7.04% and 6.51% allocation, respectively (as of July 11, 2017). The fund has returned 15.42% in the last one year and 25.36% year to date (as of July 12, 2017). INDA currently has a Zacks ETF Rank 2 (Buy) with a Medium risk outlook (read: Why India ETFs are Soaring in 2017).
WisdomTree India Earnings Fund (EPI - Free Report)
This fund provides exposure to Indian equities in multiple capitalization segments.
It has AUM of $1.71 billion and charges a fee of 84 basis points a year. Financials, Energy and Information Technology are the top three sectors of the fund, with 25.29%, 20.89% and 16.18% allocation, respectively (as of July 12, 2017). Reliance Industries Ltd, Infosys Ltd and Housing Development Finance Co are the top three holdings of the fund, with 11.65%, 6.61% and 6.28% allocation, respectively (as of July 12, 2017). The fund has returned 21.47% in the last one year and 27.43% year to date (as of July 12, 2017). EPI currently has a Zacks ETF Rank 2 with a Medium risk outlook (read: India ETFs: More Run Ahead?).
iShares India 50 ETF (INDY - Free Report)
This fund provides exposure to large-cap Indian equities.
It has AUM of $1.04 billion and charges a fee of 94 basis points a year. Banks, Computer-Software and Refineries/Marketing are the top three sectors of the fund, with 26.09%, 11.06% and 8.77% allocation, respectively (as of July 11, 2017). ITC Ltd, Housing Development Finance Co and Reliance Industries Ltd are the top three holdings of the fund, with 7.63%, 7.12% and 6.76% allocation, respectively (as of July 11, 2017). The fund has returned 18.93% in the last one year and 28.24% year to date (as of July 12, 2017). INDY currently has a Zacks ETF Rank 2 with a Medium risk outlook.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>