A single-country exchange-traded funds (ETFs) that focuses on stocks in India is iShares MSCI India ETF (INDA).
With $3.81 billion in total assets, INDA is an undeniably large fund that tracks an astonishing 85% of the equities in the Indian stock market. All of the ETF’s holdings are large- and mid-cap companies.
The 15% of public companies in India that are “missing” from the fund are the small-cap companies that fund managers chose to skip. As a result, INDA provides an excellent approximation of the total Indian market.
Since its launch in early 2012, INDA quickly attracted a huge asset base. As a result, even though the fund’s equities trade very frequently throughout the day — which normally would incur higher management fees, administrative fees and other operating costs — the total expense is spread out over a larger base. This ETF’s size, in turn, spreads the fund’s management expenses among more investors and therefore eases the overall burden. The fund is also highly liquid thanks to frequent trading of the shares by the ETF’s investors.
One of the greatest challenges facing INDA is the mismatch in market hours between India and the United States. Since INDA is entirely incorporated in the United States but focuses on Indian markets, intraday valuation of the equities can be difficult and ultimately increases the fund’s operating costs. Fortunately, the fund’s efficient management has kept the expense ratio at only 0.68%. The fund also offers a current dividend yield of 1.40%.
INDA has fared well over the course of 2016 and succeeded in pulling itself to new highs after an initial slow start to the year. Recently, the fund has unfortunately hit a rough patch as India has entered a period where all of its sectors are showing signs of weakness.
The fund’s return over the last month is -10.58%. However, its year-to-date return is -4.07% versus the S&P 500’s 6.94%.
The fund’s top five holdings are Housing Development Finance Corp Ltd (HDFC), 8.70%; Infosys Ltd (INFY), 8.03%; Reliance Industries Ltd (RELIANCE), 6.04%; Tata Consultancy Services Ltd (TCS), 4.74%; and ITC Ltd (ITC), 3.80%. The vast majority of INDA’s holdings are in consumer staples, financials, health care and information technology companies, making INDA a non-diversified fund.
If you believe in the strength of India’s growing economy and its ability to rebound from the recent setbacks, I encourage you to look further into the iShares MSCI India ETF (INDA).
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.