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India has established itself as one of the best of the emerging markets, or rather a safe abode in the otherwise-volatile emerging markets pack, in recent times. Issues that were crippling the possibilities of the Indian economy previously, including high inflation and currency depreciation, seem to be easing now. Overall, the economy is now on its way to reform (read: Indian Economy Steps Up: ETFs to Buy).
Probably all these attributes prompted First Trust to launch an ETF on India, namely First Trust ZyFin India Quality and Governance ETF. Below we highlight the India ETF which First Trust has filed recently.
Inside the Proposed Fund
As per the SEC filing, the proposed ETF looks to track the performance of the Indian companies. The underlying index of the proposed fund is owned by ZyFin Research Private Limited and looks to track ‘40 Indian securities that exhibit quality and corporate governance standards through a rules-based, objective selection process’.
The filing also indicates that “the Index takes into account restrictions on foreign ownership of Indian securities imposed by Indian regulators, and has thus been created not only for the use of Indian investors but also for funds managed on behalf of foreign investors.”
Most importantly, the index will screen stocks on the basis of volatility of earnings, leverage and return on equity, giving the portfolio a complete quality tilt. The expense ratio of the fund is yet to be disclosed (read: Quality ETFs in Focus as Global Growth Issues Spiral).
How Does it Fit in a Portfolio?
The Indian market has been on radar since the pro-growth government led by Narendra Modi took charge of India in 2014. Since then the Indian stock markets experienced a roller coaster ride. The implementation of rate cuts and looming reform plans like the goods & service tax and land acquisition bill are likely to boost the economy’s growth ahead (read: Why You Should Invest in India ETFs Now).
If this was not enough, the economy grew 7.6% in fiscal 2016 – the quickest pace in four years – higher than 7.2% in the prior fiscal. This tall feat was pulled off with the help of solid private spending. All these make the case for India ETF investing lucrative.
However, since the Indian market suffers from some gridlocks like mounting bad loans at Indian banks and falling capital spending at the corporate level, nothing could be better than taking a look at the quality stock picks – something that First Trust actually seeks to do.
ETF Competitors
Definitely competition is fierce within the space. iShares and EGShares have more than one ETF each targeting India while WisdomTree, VanEck Vectors and PowerShares also have presence in this space. The space is headed by iShares MSCI India ETF (INDA - Free Report) with $3.63 billion in assets followed by WisdomTree India Earnings Fund (EPI - Free Report) with $1.39 billion in assets. Considering that First Trust is making a late entry, the issuer will have to price its fund competitively.
However, very few presently available India ETFs offer the quality exposure that First Trust is proposing. This should help the fund to make a killing once it is approved.
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First Trust Plans Quality Exposure for India ETF
India has established itself as one of the best of the emerging markets, or rather a safe abode in the otherwise-volatile emerging markets pack, in recent times. Issues that were crippling the possibilities of the Indian economy previously, including high inflation and currency depreciation, seem to be easing now. Overall, the economy is now on its way to reform (read: Indian Economy Steps Up: ETFs to Buy).
Probably all these attributes prompted First Trust to launch an ETF on India, namely First Trust ZyFin India Quality and Governance ETF. Below we highlight the India ETF which First Trust has filed recently.
Inside the Proposed Fund
As per the SEC filing, the proposed ETF looks to track the performance of the Indian companies. The underlying index of the proposed fund is owned by ZyFin Research Private Limited and looks to track ‘40 Indian securities that exhibit quality and corporate governance standards through a rules-based, objective selection process’.
The filing also indicates that “the Index takes into account restrictions on foreign ownership of Indian securities imposed by Indian regulators, and has thus been created not only for the use of Indian investors but also for funds managed on behalf of foreign investors.”
Most importantly, the index will screen stocks on the basis of volatility of earnings, leverage and return on equity, giving the portfolio a complete quality tilt. The expense ratio of the fund is yet to be disclosed (read: Quality ETFs in Focus as Global Growth Issues Spiral).
How Does it Fit in a Portfolio?
The Indian market has been on radar since the pro-growth government led by Narendra Modi took charge of India in 2014. Since then the Indian stock markets experienced a roller coaster ride. The implementation of rate cuts and looming reform plans like the goods & service tax and land acquisition bill are likely to boost the economy’s growth ahead (read: Why You Should Invest in India ETFs Now).
If this was not enough, the economy grew 7.6% in fiscal 2016 – the quickest pace in four years – higher than 7.2% in the prior fiscal. This tall feat was pulled off with the help of solid private spending. All these make the case for India ETF investing lucrative.
However, since the Indian market suffers from some gridlocks like mounting bad loans at Indian banks and falling capital spending at the corporate level, nothing could be better than taking a look at the quality stock picks – something that First Trust actually seeks to do.
ETF Competitors
Definitely competition is fierce within the space. iShares and EGShares have more than one ETF each targeting India while WisdomTree, VanEck Vectors and PowerShares also have presence in this space. The space is headed by iShares MSCI India ETF (INDA - Free Report) with $3.63 billion in assets followed by WisdomTree India Earnings Fund (EPI - Free Report) with $1.39 billion in assets. Considering that First Trust is making a late entry, the issuer will have to price its fund competitively.
However, very few presently available India ETFs offer the quality exposure that First Trust is proposing. This should help the fund to make a killing once it is approved.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>