India ETF coming but don't get too excited

Posted by: Aaron Pressman on June 16, 2006

U.S. investors who wanted to jump on the India stock band wagon in the past haven’t had many great choices. And now that India has suffered a massive sell-off and bounce back, the same slender line up presents itself. Basically, there are a couple of closed-end funds that trade at big premiums to net asset value. The India Fund (symbol IFN), for example, is trading a 26% premium, according to ETFConnect.com. Why no simple index-based mutual fund or exchange-traded fund? Apparently there are rules limiting how foreigners can invest directly and the market is fragmented with lots of small caps.

So a lot of people were excited and even surprised when Powershares filed a proposed India ETF among a blizzard of new funds. It’s to be based on something called the Halter USX India Index. Great, what’s that?

Well, turns out it’s an index of just 18 Indian companies that trade here in the U.S. already, companies like Wipro and Rediff.com. That’s not very exciting for a couple of reasons. First, you can already buy that slim segment of the Indian market. And second, it’s not going to reflect the full Indian market. Finally and most importantly, just two companies — Wipro and Infosys Technologies — make up almost half of the weighting. That’s a lot of concentration risk. So, I’d say the wait goes on for a true India index investment vehicle.

Reader Comments

muckdog

June 16, 2006 7:17 PM

Thanks for the heads up and the note about the concentration of investments. One of the reasons for ETFs is inexpensive diversification, and I don't get it when ETFs overweight just a few stocks.

Mostafa

June 18, 2006 1:01 AM

Hi,
Good blog,
I appreciate the information.

Tom

July 21, 2006 12:27 AM

I've been looking for a good India ETF, looks like I'll have to keep looking.

Thanks for the article.

Police

August 4, 2006 8:03 AM

"Bhai"alias Pradeep Kanthraj,is the new face in the Chennai Underworld.Police are on a lookoutfor the new face who has fled the state since the Coimbatore bomb blast.Highly placed sources claim that he must be working in the neighbouring states.

roy

August 14, 2006 11:46 PM

there is now an india etf that tracks the msci india index. it is listed on singapore exchange and is denominated in us$. check out www.sgx.com/msci-india

any thoughts?

David Hepworth

March 24, 2008 10:23 AM

There is a new web site with some interesting analytics on India funds, India ETF's, and Indian stocks. www.indiafund.net

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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