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India ETF investing is at a crucial juncture right now due to Adani controversy. Gautam Adani, an Indian business tycoon and one of the richest people in the world, has been probably one of the most-typed words in the corporate world since late January.
This is because shares of companies owned by his Adani Group nosedived after the publication of a report by a U.S. short seller Hindenburg Research in late January that accused Adani Group of “stock manipulation and accounting fraud,” as quoted on The Wall Steet Journal. Adani shares lost more than $100 billion in value in just 10 days.
What Went Wrong?
Adani’s wealth has been cut by more than half and he is out of the top 20 ranks at Bloomberg Billionaire Index. Adani operates in areas like power transmission, green energy and port operation. Nathan Anderson claimed the Adani Group uses a number of shell companies to blow up stock prices and disobey India’s shareholding rules, which require at least 25% of most listed companies to be held by the public.
He also raised concerns about Adani Group’s heavy debt burden and overvalued share prices. Moreover, since Adani group is overleveraged, Credit Suisse, Citigroup and Standard Chartered stopped accepting Adani dollar bonds as collateral on margin loans.
Hindenburg has a good track record about short-selling Nikola shares. The Research house also issued report on Elon Musk’s deal to buy Twitter. The Adani stock crash is sending shockwaves across India investing, with global investors worrying about the threat that the Adani crisis may pose to India's financial stability.
Is This a Time to Buy on the Controversy?
“The Adani family owns roughly 60% of its companies, limiting other investors’ exposure,” added Barron’s. This should not cause much harm to the broad-based India investing as the portion of free-float is not high.
Moreover, the Adani Group faced a margin call of more than $500 million on a $1.1 billion share-backed loan, pressurizing the group to repay the whole debt, the Financial Times reported, citing four people with direct knowledge of the matter, as quoted on Business Standard.
Adani Group also plans to prepay a $500 million loan due next month to a group of banks that includes Barclays, Standard Chartered and Deutsche Bank, Bloomberg News reported. These banks apparently hesitated to refinance the loan.
Meanwhile, a recovery in India’s credit cycle is being noticed after a period of banks’ struggle with the cleaning up of bad debt, as quoted on Barron’s. The real GDP is projected to grow at 6.8% and 6.1% in FY2022/23 and FY2023/24 respectively, per IMF.
India’s bank credit has historically increased at a multiple of GDP. Private sector banks started with zero market share when they were first allowed to be in the operation in the early 1990s. But now they make up about 37% of the total credit outstanding in the Indian banking system, the fund INDF’s investment case.
Apart from banks, another winning area of the India investing is information technology and internet. India's digital economy jumped 2.4 times faster than the economy between 2014 and 2019 per a paper published in the latest bulletin of the Reserve Bank of India, quoted on Economic Times.
Probably this is why, banks and internet stocks from India posted good returns last week despite Adani crisis. Below we highlight a few such ETFs.
India ETFs in Focus
India Internet & Ecommerce ETF (INQQ - Free Report) – Up 3.3% Last Week
The underlying INQQ The India Internet & Ecommerce Index measures the performance of an investable universe of publicly-traded, Indian internet and ecommerce companies. The fund charges 86 bps in fees.
The underlying Nifty Financial Services 25/50 Index measures the performance of companies in the Indian financial market, including banks, financial institutions, housing finance, insurance companies and other financial services companies. The fund charges 75 bps in fees.
The underlying MVIS Digital India Index tracks the overall performance of companies involved in supporting the digitization of the Indian economy. The fund charges 75 bps in fees.
The underlying Nifty 50 Index measures the equity performance of the top 50 companies by free float market capitalization whose equity securities trade in the Indian securities markets. Financials (37.16%) and information technology (15.14%) are the top two sectors of the fund.
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Winning India ETFs Despite Adani Controversy
India ETF investing is at a crucial juncture right now due to Adani controversy. Gautam Adani, an Indian business tycoon and one of the richest people in the world, has been probably one of the most-typed words in the corporate world since late January.
This is because shares of companies owned by his Adani Group nosedived after the publication of a report by a U.S. short seller Hindenburg Research in late January that accused Adani Group of “stock manipulation and accounting fraud,” as quoted on The Wall Steet Journal. Adani shares lost more than $100 billion in value in just 10 days.
What Went Wrong?
Adani’s wealth has been cut by more than half and he is out of the top 20 ranks at Bloomberg Billionaire Index. Adani operates in areas like power transmission, green energy and port operation. Nathan Anderson claimed the Adani Group uses a number of shell companies to blow up stock prices and disobey India’s shareholding rules, which require at least 25% of most listed companies to be held by the public.
He also raised concerns about Adani Group’s heavy debt burden and overvalued share prices. Moreover, since Adani group is overleveraged, Credit Suisse, Citigroup and Standard Chartered stopped accepting Adani dollar bonds as collateral on margin loans.
Hindenburg has a good track record about short-selling Nikola shares. The Research house also issued report on Elon Musk’s deal to buy Twitter. The Adani stock crash is sending shockwaves across India investing, with global investors worrying about the threat that the Adani crisis may pose to India's financial stability.
Is This a Time to Buy on the Controversy?
“The Adani family owns roughly 60% of its companies, limiting other investors’ exposure,” added Barron’s. This should not cause much harm to the broad-based India investing as the portion of free-float is not high.
Moreover, the Adani Group faced a margin call of more than $500 million on a $1.1 billion share-backed loan, pressurizing the group to repay the whole debt, the Financial Times reported, citing four people with direct knowledge of the matter, as quoted on Business Standard.
Adani Group also plans to prepay a $500 million loan due next month to a group of banks that includes Barclays, Standard Chartered and Deutsche Bank, Bloomberg News reported. These banks apparently hesitated to refinance the loan.
Meanwhile, a recovery in India’s credit cycle is being noticed after a period of banks’ struggle with the cleaning up of bad debt, as quoted on Barron’s. The real GDP is projected to grow at 6.8% and 6.1% in FY2022/23 and FY2023/24 respectively, per IMF.
India’s bank credit has historically increased at a multiple of GDP. Private sector banks started with zero market share when they were first allowed to be in the operation in the early 1990s. But now they make up about 37% of the total credit outstanding in the Indian banking system, the fund INDF’s investment case.
Apart from banks, another winning area of the India investing is information technology and internet. India's digital economy jumped 2.4 times faster than the economy between 2014 and 2019 per a paper published in the latest bulletin of the Reserve Bank of India, quoted on Economic Times.
Probably this is why, banks and internet stocks from India posted good returns last week despite Adani crisis. Below we highlight a few such ETFs.
India ETFs in Focus
India Internet & Ecommerce ETF (INQQ - Free Report) – Up 3.3% Last Week
The underlying INQQ The India Internet & Ecommerce Index measures the performance of an investable universe of publicly-traded, Indian internet and ecommerce companies. The fund charges 86 bps in fees.
Nifty India Financials ETF (INDF - Free Report) – Up 1.4%
The underlying Nifty Financial Services 25/50 Index measures the performance of companies in the Indian financial market, including banks, financial institutions, housing finance, insurance companies and other financial services companies. The fund charges 75 bps in fees.
VanEck Digital India ETF (DGIN - Free Report) – Up 0.7%
The underlying MVIS Digital India Index tracks the overall performance of companies involved in supporting the digitization of the Indian economy. The fund charges 75 bps in fees.
iShares India 50 ETF (INDY - Free Report) – Up 0.4%
The underlying Nifty 50 Index measures the equity performance of the top 50 companies by free float market capitalization whose equity securities trade in the Indian securities markets. Financials (37.16%) and information technology (15.14%) are the top two sectors of the fund.