Picking The Right India ETF

October 07, 2016

EPI is a total market ETF, but one that offers a slightly alternative take on the space by selecting and weighting its portfolio of India equities based on earnings. EPI essentially offers access to the companies that have had strong earnings in the most recent fiscal year.

The result is a strategy that tends to tilt toward value names and often allocates most heavily to higher beta sectors, according to ETF.com Analytics.

The overall portfolio is a lot broader than INDA, with some 243 holdings, and an average daily volume of more than $74 million. But EPI trades with a marginally higher average spread of 0.05%, putting its total cost of ownership around $89 per $10,000 invested. That’s roughly 25% more than INDA’s all-in price tag.

INXX is an infrastructure fund. It owns exclusively infrastructure-related companies. In that sense, INXX is not a total market fund in the way INDA and EPI are, but it gets classified as one by our data provider FactSet, because the infrastructure theme cuts across various sectors. INXX tilts toward sectors linked to infrastructure such as industrials, materials and utilities, but it also allocates heavily to consumer discretionary, for instance.

INXX only holds 30 securities, and trades with a pretty wide average spread of 0.47%. That brings the total cost of ownership of this fund to $135 per $10,000 invested—a pretty high price tag for this segment. But competing on cost isn’t INXX’s main goal. “It's for investors with a strong conviction regarding the growth potential of Indian infrastructure,” according to ETF.com Analytics.

There’s one India total market ETN:

INP also competes in the total market segment, but with a crucial difference: It’s not an exchange-traded fund, but an exchange-traded note. That means the strategy is backed by the credit of its issuing bank; in this case, Barclays.

INP also tracks the same benchmark underlying the largest India ETF, INDA—the MSCI India Total Return Index, which offers exposure to 85% of India’s market cap. Once upon a time, INP was the first exchange-traded product to focus exclusively on Indian equities. It launched in 2006.

But today the strategy competes with more liquid, cheaper-to-own and in one case, identical-in-exposure ETFs, making it a choice in this segment that’s more difficult to support, according to ETF.com Analytics.

INP has “adequate liquidity,” but trades with a wide average spread of 0.52%, which bumps the cost of owning and trading this strategy to $141 per $10,000 invested—the highest price tag among these India funds. It’s also closed for creations at the moment, according to FactSet.

 There are also two large-cap India ETFs:

Both funds invest in India’s 50 largest and most liquid firms, but they track slightly different benchmarks, resulting in sector tilt differences. For instance, INDY is heavily allocated to financials, at about 31% of the portfolio, followed by technology at 14%. These two sectors represent about half of the overall mix. PIN, meanwhile, tilts more toward energy, at 23%, and financials, at 20%.

For a complete list of the 13 ETFs offering access to India’s equity market, check out ETF.com’s India Channel.

Contact Cinthia Murphy at [email protected]

 

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