Best India ETFs for Q4 2022

Investing News

India exchange-traded funds (ETFs) offer a way for investors to geographically diversify their global portfolios by owning a range of companies in the world’s second most populous nation and one of the world’s largest emerging markets. India ETFs track the performance of a basket of equities trading on the National Stock Exchange of India Ltd. (NSE). Some of India’s largest companies include Indian Oil Corp. Ltd. (IOC), Bharat Petroleum Corp. Ltd. (BPCL), and Tata Motors Ltd. (TATAMOTORS).

India’s economy was significantly impacted by the COVID-19 pandemic, but it has bounced back substantially in recent quarters. The country’s gross domestic product (GDP) climbed by 8.9% in 2021, according to The World Bank. The growth was pronounced enough to allow India to surpass the U.K. to become the fifth-largest economy in the world in the final quarter of 2021. The International Monetary Fund predicts that India’s GDP will climb by 7.4% in 2022.

Key Takeaways

  • Indian equities outperformed the broader market over the past year.
  • The India exchange-traded funds (ETFs) with the best one-year trailing total returns are INCO, NFTY, and EPI.
  • The top holdings of these funds are Mahindra & Mahindra Ltd., Bajaj Finserv Ltd., and Reliance Industries Ltd., respectively.

There are eight India ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). Note that these funds target Indian stocks rather than bonds. India-based equities, as measured by the MSCI India Index, have outperformed the broader market, with a total return of -3.7% over the past 12 months compared with the S&P 500’s total return of -11.0%, as of Sept. 1, 2022. The best-performing India ETF, based on performance over the past year, is the Columbia India Consumer ETF (INCO).

We examine the top three India ETFs below. All numbers below are as of Sept. 1, 2022. In order to focus on the funds’ investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large.

  • Performance Over One-Year: 1.6%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: 0.28%
  • Three-Month Average Daily Volume: 7,038
  • Assets Under Management: $84.0 million
  • Inception Date: Aug. 10, 2011
  • Issuer: Ameriprise Financial

INCO targets the Indxx India Consumer Index, which is a free-float adjusted market capitalization-weighted index of no more than 30 companies in the consumer industry in India. Companies included in the index focus on autos, food products, beverages, media, household products, and similar areas. Consumer discretionary stocks make up over 55% of holdings, and consumer staples make up the remainder.

The top holdings of INCO include Mahindra & Mahindra Ltd. (500520:BOM), an automotive manufacturing company; ITC Ltd. (500875:BOM), a conglomerate with operations in hotels, cigarettes, specialty papers and packaging, and software; and Eicher Motors Ltd. (505200:BOM), a maker of commercial vehicles and motorcycles.

  • Performance Over One-Year: -2.2%
  • Expense Ratio: 0.80%
  • Annual Dividend Yield: 0.49%
  • Three-Month Average Daily Volume: 1,362
  • Assets Under Management: $50.3 million
  • Inception Date: Feb. 14, 2012
  • Issuer: First Trust

NFTY tracks the NIFTY 50 Equal Weight Index, which is an equally weighted version of the NIFTY 50 Index, including the 50 largest and most liquid securities on the National Stock Exchange of India. NFTY focuses on large-cap companies and includes a blend of growth and value stocks. Financials make up the largest portion of the portfolio, at over 23%, followed by materials and consumer discretionary companies.

The top holdings of NFTY include Bajaj Finserv Ltd. (532978:BOM), a non-banking financial services company; IndusInd Bank Ltd. (532187:BOM), a commercial bank; and Titan Company Ltd. (500114:BOM), a maker of jewelry, watches, and other fashion accessories.

  • Performance Over One-Year: -4.1%
  • Expense Ratio: 0.84%
  • Annual Dividend Yield: 0.83%
  • Three-Month Average Daily Volume: 336,712
  • Assets Under Management: $732.4 million
  • Inception Date: Feb. 22, 2008
  • Issuer: WisdomTree

EPI tracks the WisdomTree India Earnings Index, a fundamentally weighted index that gauges the performance of profitable companies incorporated and traded in India and eligible to be purchased by foreign investors. The ETF provides a valuation-centric approach to India’s equity markets, weighting individual holdings by earnings rather than by market capitalization. It focuses on large cap companies across the Indian economy, with energy, materials, and bank stocks accounting for nearly half of invested assets.

EPI’s top three holdings are Reliance Industries Ltd. (500325:BOM), a manufacturer of petrochemicals, synthetic fibers, textiles, and more; Housing Development Finance Corp. Ltd. (500010:BOM), a provider of housing finance; and Infosys Ltd. (500209:BOM), a provider of IT consulting and software services.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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