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India FDI up 37% in Fiscal Q1: ETFs in Focus

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Foreign Direct Investment into India grew 37% to $10.4 billion in the April-June 2017 period compared with $7.59 billion in the year-ago period. A strong inflow of foreign investments is expected to bode well for the Indian rupee.


The Indian government has played its part to make investing in the country attractive by easing FDI policies and creating a business-friendly environment.


Per Economic Times, the sectors that attracted high foreign inflows were services, telecom, trading, computer hardware and software and automobile. Moreover, from a geographical perspective, Singapore, Mauritius, Netherlands and Japan contributed a major portion of the increase in FDI.


Reserve Bank of India, the primary banking authority of India, slashed the repo rate by 25 basis points earlier this month. Repo rate is the rate at which the Reserve Bank of India (RBI) lends to commercial banks. The repo rate now stands at 6% (read: Indian Central Bank Cuts Key Rates: ETFs to Buy).


India’s GDP grew 6.1% annually in the January-March quarter of 2017, a two-year low. However, the recent rate cut is expected to create pressure on banks to reduce interest rates on loans, thereby spurring business activity.


The monetary policy committee of the RBI slashed the short-term lending rate, owing to pressures the economy faced due to consistently falling inflation and weak demand. The weak demand was primarily driven by the ban of high-currency notes last year by the Indian government and is expected to be transitory.


Despite these headwinds, the long-run forecast for the Indian economy remains strong. The International Monetary Fund (IMF) sees the Indian economy growing at 7.2% in 2017 and at 7.7% in 2018 (read: Indian Stock Market at Record High: ETFs to Buy).


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 $5.20 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 23.40%, 13.30% and 12.51% allocation, respectively (as of August 18, 2017). Housing Development Finance Co, Reliance Industries Ltd and Infosys Ltd are the top three holdings of the fund, with 9.41%, 7.36% and 6.11% allocation, respectively (as of August 18, 2017). The fund has returned 14.63% in the last one year and 23.91% year to date (as of August 21, 2017). INDA currently has a Zacks ETF Rank 2 (Buy) with a Medium risk outlook.


WisdomTree India Earnings Fund (EPI - Free Report)


This fund provides exposure to Indian equities in multiple capitalization segments.


It has AUM of $1.74 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 25.67%, 21.84% and 15.87% allocation, respectively (as of August 21, 2017). Reliance Industries Ltd, Housing Development Finance Co and Infosys Ltd are the top three holdings of the fund, with 12.09%, 6.67% and 5.94% allocation, respectively (as of August 21, 2017). The fund has returned 20.87% in the last one year and 26.10% year to date (as of August 21, 2017). EPI currently has a Zacks ETF Rank 2 with a Medium risk outlook.


iShares India 50 ETF (INDY - Free Report)


This fund provides exposure to large-cap Indian equities.


It has AUM of $1.13 billion and charges a fee of 93 basis points a year. Banks, Computer-Software and Refineries/Marketing are the top three sectors of the fund, with 26.83%, 10.90% and 9.27% allocation, respectively (as of August 18, 2017). Housing Development Finance Co, Reliance Industries Ltd and ITC Ltd are the top three holdings of the fund, with 7.49%, 7.10% and 6.48% allocation, respectively (as of August 18, 2017). The fund has returned 18.09% in the last one year and 26.73% year to date (as of August 21, 2017). INDY currently has a Zacks ETF Rank 2 with a Medium risk outlook.


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