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India ETF coming but don't get too excited


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June 16, 2006

India ETF coming but don't get too excited

Aaron Pressman

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.

02:19 PM

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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.

Posted by: muckdog at June 16, 2006 07:17 PM

Hi,

Good blog,

I appreciate the information.

Posted by: Mostafa at June 18, 2006 01:01 AM

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

Thanks for the article.

Posted by: Tom at July 21, 2006 12:27 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.

Posted by: Police at August 4, 2006 08:03 AM

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?

Posted by: roy at August 14, 2006 11:46 PM


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