No One Chasing India ETFs Rally

September 30, 2019

India ETFs have been surging, rallying as much as 8% in five days on the heels of an unprecedented corporate tax rate cut many say could boost earnings sooner rather than later.

However, investor enthusiasm remains muted at best.

The biggest India ETFs, the $5 billion iShares MSCI India ETF (INDA), and the $1.2 billion WisdomTree India Earnings Fund (EPI), each gained roughly 7% last week. The iShares India 50 ETF (INDY), which has $744 million in total assets, jumped 8.3%.

 

 

No Asset Inflows

While the one-week performance charts are impressive, assets have yet to follow the market uptick. India ETFs have seen negligible-to-zero net creations in the past week despite their performance. No one seems to be chasing those gains.

Year to date, that lack of appetite for Indian equities is evident. INDA has gathered $325 million in net creations so far in 2019, but it’s more the exception than the rule. Others, including EPI and INDY, remain net asset losers year to date, and understandably so.

CNBC reported that India’s GDP growth has now declined for six straight quarters, sitting at multiyear lows. This is an emerging market that’s been struggling to expand.

Looking to spur economic growth, India’s government cut tax rates on most Indian corporations from 35% to 25% this past week. But if asset flows offer any clues about how ETF investors feel, it seems they’re waiting for confirmation that lower taxes will in fact lead to better growth.

So far this year, India equity ETFs have largely underperformed broader emerging market ETFs such as the iShares Core MSCI Emerging Markets ETF (IEMG). Some of them—EPI—are still in the red in 2019.

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