Despite slowing economic growth, increased tariff and tensions with Pakistan, India’s stock market has prospered since last Diwali. In fact, the BSE Sensex gained nearly 11% over the past year while the National Stock Exchange index (Nifty) fetched returns of 9.5%.
These gains are definitely solid, and investors are again anticipating another banner year. This is especially true against the backdrop of the Modi-led government for the second time, which introduces several reforms including an overhaul of the tax system, corporate tax cuts and implementation of a new bankruptcy law. Additionally, easing of monetary policies are pushing the stocks higher. With regard to this, the Reserve Bank of India slashed interest rates for the fourth time this year to stimulate the slowest growth in Asia’s third-largest economy in nearly five years (read: Will Fourth Rate Cut in 2019 Help India ETFs Recover?).
Further, the optimism and fervor surrounding the festival of Diwali and the old belief of Muhurat trading are attracting capital inflows to the country. Muhurat trading is the auspicious stock market trading for an hour on the day of Diwali that according to Hindu belief protects individuals from evil and brings prosperity throughout the year. It has been followed for more than half a century now.
Historically, the equity indices have delivered positive returns in these special trading sessions, though trading volume is usually very low and fewer stocks move during that short duration. BSE Sensex have moved up in 11 out of last 14 Muhurat trading sessions.
Ahead of this Diwali, which falls on Oct 27, the major Indian benchmarks are already up more than 1% this month. Several India ETFs are poised to surge in the coming days on the festive mood and religious customs (read: India ETFs to Get a Short-Term Boost: Here's Why).
Below we have highlighted five funds that will brighten investors’ portfolio with enhanced returns. These products have generated excellent returns over the trailing one-year period and have a solid Zacks ETF Rank #3 (Hold), suggesting more room for upside in the months to come.
iShares India 50 ETF (INDY - Free Report)
This ETF provides exposure to the largest 52 Indian stocks by tracking the Nifty 50 Index. It has a moderate concentration on the top holdings with none of the securities holding more than 10.1% of the assets. With respect to sectors, financials takes the top spot at 40%, closely followed by energy (13.5%) and information technology (12.4%). The product manages assets worth $755.2 million and trades in good volume of nearly 225,000 million shares a day. It is a high-cost choice in the space, charging 94 bps in annual fees and has risen 18.4% in a year.
iShares MSCI India ETF (INDA - Free Report)
It offers exposure to large and mid-cap companies by tracking the MSCI India Index and charging 68 bps in fees per year from investors. Holding 80 stocks in its basket, the fund is highly concentrated on the top two firms with double-digit exposure each. Other firms hold no more than 6.5% share. Here again, financials dominates the fund’s portfolio with one-fourth share, closely followed by 16.4% allocation to energy. INDA is the largest and the most popular ETF in this space with AUM of $5.1 billion and average trading volume of 4.5 million shares a day. It has gained 16.8% in a year (read: India ETFs to Tap on Corporate Tax Cuts).
Franklin FTSE India ETF (FLIN - Free Report)
This fund follows the FTSE India Capped Index, holding 154 stocks in its basket with concentration on the top two firms. Here again, financials takes the largest share at 24.5% while energy, information technology and consumer staples round off the next three spots. The ETF has amassed $15.6 million in its asset base and trade in average daily volume 7,000 shares. It charges 19 bps in annual fees and has gained 15.8% over the past one year.
Invesco India ETF (PIN - Free Report)
This ETF tracks the FTSE India Quality And Yield Select Index, holding 126 stocks in its basket and with higher concentration on the top two firms. Other firms hold less than 7.3% of the assets. The fund is widely diversified across sectors with financials, information technology, energy and consumer staples taking double-digit allocation each. PIN has accumulated $128.8 million in its asset base while trading in average daily volume of 53,000 shares. It charges 82 bps in annual fees and was up 14.7% in the same time frame.
Columbia India Consumer ETF (INCO - Free Report)
This ETF targets the consumer industry of India stock market and follows the Indxx India Consumer Index. It holds 31 stocks in its basket with none holding more than 7.03% share. The product has amassed $107.1 million in its asset base and charges 75 bps in annual fees. From a sector look, automobiles occupies the top position with 25.6% share while personal products and food components round off the next two places with over 18.4% and 13.3% share, respectively. INCO trades in volume of 15,000 shares a day on average and has gained 12.7% in the last 12 months (see: all the emerging Asia Pacific ETFs here).
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