New India Small-Cap ETF in the Works

• By Tom Lydon
• On 8:07 am EST, Monday November 2, 2009

Tom Lydon (ETF Trends) submits: India has been a fast-growing market for the last few years, and Van Eck is hoping that a small-cap ETF it has in registration with give investors even more exposure to the nation.

Van Eck has registered with the SEC for a new India small-cap ETF, reports Cinthia Murphy for IndexUniverse. The Market Vectors India Small-Cap ETF will seek to reflect the performance of the Market Vectors India Small-Cap Index. Potential investors should note that the fund will invest in the more volatile aspects of an already volatile equities market.

There are currently three ways to gain exposure to India’s economy: WisdomTree India Earnings Fund (NYSEArca: EPI), PowerShares India (NYSEArca: PIN) and iPath MSCI India Index (NYSEArca: INP). PIN and INP have exposure to large-caps; EPI has 20% weighted in mid-caps and the rest of its exposure is in large-caps.

India’s Finance Minister Pranab Mukherjee stated that the economy is in recovery, albeit in a slow one, according to RTTNews. The Prime Minister supports a rational interest rate policy moving along with fiscal measures to nurture the economy.

The Reserve Bank of India has adopted a soft monetary policy, issuing banking sector funds to aid the economy.

SBI Chairman O.P. Bhatt expects a 7% expansion in fiscal 2010, while RBI Professional forecasters revised their forecast downward to 6%, according to Outlook India.

On the upside:

Companies will likely ask banks for working capital loans as the IPO market picks up, which would help revive the economyThe auto and infrastructure industries are seeing more demandIndustrial production is upBusiness confidence is on the optimistic sideStock markets are strong On the downside:

Private consumption demand is slowingThe first quarter showed a decline in corporate salesA weak monsoon season has hurt agricultural outputCredit growth is lowExports have dipped PowerShares India (NYSEArca: PIN): up 64.2% year-to-date

WisdomTree India Earnings (NYSEArca: EPI): up 78.7% year-to-date

Max Chen contributed to this article.

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