How to Invest in India ETFs

Learn how to invest in the leading emerging markets economy with India ETFs.

kent
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Research Lead
Reviewed by: Lisa Barr
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Edited by: Lisa Barr

India recently surpassed China as the world’s most populous country, and its economy is booming. Since India’s economy is diverse and encompasses a range of sectors, exchange-traded funds can be a smart way to gain access to this emerging market and to participate in its growth story over the long term. 

In this article, we provide an outlook on India’s growth potential, as well as details on the top India ETFs. 

Investing in India’s Economic Growth 

India’s economy is expected to grow at a healthy pace in the coming years, although it is facing some challenges. The IMF has forecast that India’s economy will grow by 6.3% in fiscal year 2023-24. This growth will be supported by strong growth in the services sector and continued investment in infrastructure. However, inflation and unemployment are expected to remain elevated. 

Investors interested in accessing India’s growth potential can gain exposure to the emerging economy with a low-cost, diversified exchange-traded fund. Since India's economy is diverse and encompasses various sectors such as technology, finance, manufacturing and consumer goods, India ETFs are arguably the ideal investment choice. Investing in an India-focused ETF can give you exposure to a wide range of these sectors, allowing you to capitalize on the growth prospects of the entire economy. 

What Are the Top India ETFs by AUM? 

The top India ETFs, as measured by assets under management on August 14, 2023, are: 

  1. iShares MSCI India ETF (INDA) 
  2. WisdomTree India Earnings Fund (EPI) 
  3. iShares India 50 ETF (INDY) 
  4. iShares MSCI India Small-Cap ETF (SMIN) 
  5. Franklin FTSE India ETF (FLIN) 

iShares MSCI India ETF 

The iShares MSCI India ETF (INDA) seeks to track the performance of the MSCI India Index. INDA offers a solidly representative basket of India stocks covering 85% of market capitalization. The expense ratio for INDA is 0.64% and the AUM is $6.02 billion. 

WisdomTree India Earnings Fund 

The WisdomTree India Earnings Fund (EPI) tracks a total market index of Indian companies selected and weighted by earnings, rather than using a market-cap-weighted approach, resulting in a value-oriented portfolio. The expense ratio for EPI is 0.84% and the AUM is $1.09 billion. 

iShares India 50 ETF

The iShares India 50 ETF (INDY) seeks to track the investment results of the Nifty 50 Index, which is composed of 50 of the largest Indian equities. The expense ratio for INDY is 0.89% and the AUM is $653.28 million. 

iShares MSCI India Small-Cap ETF

The iShares MSCI India Small-Cap ETF (SMIN) tracks a market-cap-weighted index of the bottom 14% of companies traded on India’s stock markets, thus providing investors with exposure to a basket of small cap Indian stocks. The expense ratio for SMIN is 0.74% and the AUM is $379.34 million. 

Franklin FTSE India ETF

The Franklin FTSE India ETF (FLIN) seeks to track the performance of the FTSE Indi RIC Capped Index, which offers exposure to large and midcap Indian equities. The expense ratio for FLIN is 0.19% and the AUM is $347.32 million. 

The Pros and Cons of Investing in India ETFs 

Investing in India ETFs comes with multiple advantages, such as diversified exposure to a growing economy, but these funds also come with some disadvantages, such as market volatility, currency risk and country-specific risks.  

Here are the main pros and cons of investing in India ETFs: 

Pros 

  • Diversification: India ETFs provide instant diversification across various sectors of India’s economy, reducing the risk associated with investing in individual stocks. 
  • Exposure to a growing economy: India is a rapidly growing economy with significant growth potential across sectors like technology, consumer goods, finance and manufacturing. Investing in India ETFs allows you to participate in this growth story. 
  • Ease of access: India ETFs are easily accessible through major stock exchanges, allowing investors to buy and sell shares like individual stocks. 
  • Cost efficiency: ETFs generally have lower expense ratios compared to actively managed funds, which can help you keep more of your investment returns. 
  • Transparency: Most ETFs disclose their holdings on a regular basis, providing transparency into the assets you own. 
  • Passive investment strategy: Many India ETFs follow a passive investment approach, aiming to replicate the performance of an underlying index. This approach eliminates the need for active stock picking. 
  • Liquidity: India ETFs are traded on major exchanges, providing liquidity and allowing investors to buy or sell shares throughout the trading day. 

Cons 

  • Market volatility: Like any investment, India ETFs are subject to market fluctuations and volatility. Economic, political and geopolitical events can impact their performance. 
  • Currency risk: If India’s rupee depreciates against an investor’s base currency, such as the U.S. dollar, it can affect the returns when converted back. 
  • Country-specific risks: Investing in a single-country ETF exposes you to country-specific risks, such as regulatory changes, government policies and economic stability. 
  • Limited exposure: While India ETFs offer diversification within the country, they may not capture the entire range of investment opportunities in India's diverse economy. 
  • Long-term commitment: Investing in India ETFs should ideally be a long-term commitment, as short-term market volatility may affect short-term returns. 
  • Liquidity and trading costs: While ETFs are generally liquid, trading volumes can vary, leading to potential bid/ask spreads and trading costs. 

Bottom Line on Investing in India ETFs 

India’s economy has strong growth potential in the years ahead; however, investors should always use caution when considering an investment in an emerging market economy like India’s. Economic conditions, geopolitical events and other factors can influence the performance of investments, so it's important to make investment decisions based on a well-informed and long-term perspective rather than short-term market fluctuations. 

As with any investment, diversification across different asset classes and regions is recommended to manage risk effectively. 

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 

 

Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 

 

Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.