ETF.com Analysis

India Inks ETF Focused On State-Run Names

January 16, 2013
Share:

Related ETFs

Ticker Fund name
INCOEGShares India Consumer ETF
Related ETF Lists
Asia-Pacific ETFs

Is India’s plan for its own ETF lunacy or genius?

India is launching an ETF that will invest in state-run businesses. The move comes as part of the government’s efforts to raise cash and close the country’s fiscal gap.

The ETF is well-timed: Investor interest in India is piqued. After all, in 2012, the EGShares India Consumer ETF (NYSEArca: INCO) rose nearly 52 percent to close out the year as one of the top-performing ETFs for 2012.

Details on the Indian government’s planned ETF are still emerging: We know the portfolio is likely to hold 15 to 20 profit-making companies, according to a senior finance ministry official quoted by the Wall Street Journal.

But it’s not yet clear which companies/sectors would be included and whether the government would be relinquishing majority-shareholder status.

As a point of reference, let’s use the MSCI India Investable Markets Index as a proxy to see a breakdown of the investable Indian market below:

 

MSCI Investable India Market

 

The Indian government owns a broad portfolio of companies whose operations range from health care to mining.

What is clear, according to the official quoted in the Journal, is that the fund will purchase its shares directly from the government.

Why now?

The plan is borne from a need for the Indian government to close its fiscal gap, and a large part of closing that budget is selling stakes in state-run businesses.

The problem has been drumming up sufficient investor interest: According to the Journal, the Indian government has raised less than $1.3 billion of the $5.5 billion total it hopes to raise.

Why an ETF?

 

ETF.COM CHANNELS

Interested in China? Use our China ETFs Channel, library, and ETF screener.

Interested in oil? Use our oil ETFs channel, library and ETF screener!

ETF DAILY DATA

The small-cap ETF was in favor on Monday, May 23.

The top four ETF issuers all saw net outflows from their products on Monday, May 23.

ETF.COM ANALYST BLOGS

By Sumit Roy

Here's why the once-strong correlation between stocks and oil has weakened.

By Drew Voros

Leveraged and inverse funds are being traded like they were designed to be.

By Matt Hougan

This year so far, 772 ETFs have attracted assets, but one stands alone as defining where the industry is heading.

By Drew Voros

Some ETF names get right to the point; others take a lot more words to describe what they’re all about.

ETF INDUSTRY PERSPECTIVE

By Adam Patti

Is a momentum-focused approach a solution for fixed-income investors?

By Jack Fonss

An ideal ETF should be perfectly linked to its underlying.

By Kristi Kuechler

Avoid taking unrewarded—or unintended—risks.