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India ETFs Soaring Ahead of Elections

Sweta Killa

India’s stock market has been on a tear lately given the optimism building up around the victory of the prime minister Narendra Modi's National Democratic Alliance (NDA) party in the upcoming general elections. According to the CVoter opinion poll, the coalition led by Narendra Modi could win 264 seats in the election compared with 141 for the Congress party-led opposition alliance.

The lead for NDA party comes especially following Modi’s action of a military strike on Pakistan in retaliation for a suicide attack in the disputed Kashmir region. Plus, Modi's populist budget unveiled last month and a latest rate cut by the central bank are helping him to pave the way for victory.

Hopes of deeper economic reforms and further monetary policy easing also added to the strength in the India stocks. Further, the Fed’s dovish outlook on future rates hike as well as the European Central Bank’s downgrading outlook on Eurozone’s economy has renewed optimism in this emerging market, inviting large inflows into the country (read: ECB Surprisingly Dovish: Play Currency-Hedged Euro Zone ETFs).

Given this bullishness, the stock exchange data showed that net foreign portfolio inflows into India hit a 15-month high of $2.42 billion in February, a big swing from 2018 net outflows of $4.4 billion, which was the largest since the 2008 global financial crisis. According to SEBI data, foreign institutional investors bought $2.37 billion in stocks in February, their biggest purchase since November 2017. The large crux of inflows has continued this month so far with India seeing the highest inflow within emerging markets after Brazil and Indonesia, per the Bloomberg data.

As a result, we have highlighted five ETFs that have generated excellent returns over the past month and carry a Zacks ETF Rank #2 (Buy) or 3 (Hold) (see: all the emerging Asia Pacific ETFs here).

Columbia India Small Cap ETF SCIN

This fund offers exposure to the companies in the small-cap segment in India and follows the Indxx India Small Cap Index. It is unpopular and illiquid with $14.9 million in AUM and average daily volume of 5,000 shares. It has an expense ratio of 0.77%. Holding 73 securities, the ETF is pretty spread across components with each accounting for less than 4.7% share. The product is heavy on materials taking nearly one-fourth share while financials, industrials and information technology round off the next three spots. The fund has surged 16.3% over the past month and has a Zacks ETF Rank #3 (read: Best and Worst ETFs of Last Week).

VanEck Vectors India Small-Cap Index ETF SCIF

This fund also targets the small-cap segment of the Indian equity market and tracks the MVIS India Small-Cap Index. In total, it holds 207 securities in its basket with none making up for more than 2.53% of assets. SCIF is also well spread across various sectors, with materials, consumer discretionary, industrials, financials and information technology making up for a double-digit exposure each. The fund has amassed $190.8 million in its asset base while charging 77 bps in annual fees. It trades in average daily volume of 56,000 shares and has gained 15.2% in a month. SCIF has a Zacks ETF Rank #3.

Columbia India Infrastructure ETF INXX

This fund provides exposure to the growing infrastructure corner of the broad Indian market by tracking the Indxx India Infrastructure Index. Holding 30 stocks in its basket, the fund is moderately concentrated across components with each security holding no more than 5.75% share. From a sector look, materials take the top spot with 32.8% share, closely followed by industrials (27%), utilities (19.4%), and communication services (12.1%). The fund has accumulated just $30.6 million in its asset base and charges 76 bps in annual fees. The ETF is up 12% in a month and trades in a volume of 8,000 shares a day. It has a Zacks ETF Rank #3 (read: Why India ETFs Failed to Catch Up with Global Market Rally).

iShares MSCI India Small-Cap ETF SMIN

This product provides exposure to the small-cap segment of the broad Indian stock market by tracking the MSCI India Small Cap Index. It holds a well-diversified portfolio of 264 stocks with none accounting for more than 2.7% share. Here, financials dominates the fund portfolio with one-fourth share while consumer discretionary, industrials and materials rounded off the next three spots with double-digit exposure each. SMIN has AUM of $269.6 million and trades in average daily volume of 72,000 shares. It charges 77 bps in annual fees and has climbed 11.8% in a month. The fund has a Zacks ETF Rank #3.

First Trust India NIFTY 50 Equal Weight ETF NFTY

This ETF tracks the NIFTY 50 Equal Weight Index, which is equally weighted and measures the performance of the 50 largest and most-liquid India securities listed on the National Stock Exchange of India. It holds 50 stocks in its basket with each making up for less than 2.5% of assets. The product is well spread across sectors with financials, basic materials, consumer cyclical, energy and technology making up for double-digit allocation each. It is unpopular and illiquid with AUM of $3.6 million and average daily volume of under 1,000 shares. The fund charges 80 bps in annual fees and has a Zacks ETF Rank #2 (Buy) (read: After a Tough January, Can India ETFs Surge on Budget Stimulus?).

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