The launch of two Indian ETFs recently has provided investors with investing options within the Indian market. Today, we take a look at these two new ETFs, ETFS Reliance India Nifty 50 ETF (NDIA) and Betashares India Quality ETF (IIND).
Until recently, Australian ETF investors looking for exposure to the burgeoning Indian economy could only access it through broad based emerging markets ETF, of which there are a number of options available. However, with India making up on average just 9% of global emerging markets, investors were required to combine their Indian exposure with a number of other global emerging markets.
The launch of two Indian ETFs recently has now provided investors with options in the Indian market. Today, we take a look at these two new ETFs, ETFS Reliance India Nifty 50 ETF (NDIA) and Betashares India Quality ETF (IIND).
The Nifty 50 index is one of India’s key share market indexes, covering the top 50 companies on the Indian share market. It could be considered as India’s version of the S&P/ASX 200 Index in Australia.
ETF Securities new ETF, NDIA, as the name suggests follows the Nifty 50 Index. This makes it a vanilla index tracking ETF giving investors exposure to India’s largest companies. It has a Management fee of 0.85% and expense recovery of 0.15%, making total investment fees 1.00%.
NDIA launched in June 2019 and currently has a market capitalisation of $5.7m. According to ETF Securities, the 5 year return of the Nifty 50 Index is 12.71% per annum.
BetaShares take on Indian ETFs is slightly different to the above. Employing a Smart Beta Strategy, IIND, seeks to target the largest companies in India who meet their ‘Quality’ definitions. They access this strategy through following the Solactive India Quality Select Index.
The index finds quality companies through first taking the largest 75 companies by Market Capitalisation. It then ranks these companies on their scores in Return on Equity, Earnings Per Share Growth, Debt/Equity Ratio and Earnings Stability. The index then chooses the top scoring companies, applying some weighting criteria based on their size, providing 30 companies to invest in.
IIND launched in August 2019 and currently has a market capitalisation of $1m. According to BetaShares, the 5 year return of the Solactive India Quality Select Index is 13.73% per annum. Management costs for IIND are 0.72% per annum with recoverable expenses of 0.08%, making total cots 0.80% per annum.
When comparing sector exposure between NDIA and IIND, there is significant difference between the two. The passive NDIA has 40% exposure to Financials, providing a concentration to this sector similar to the Australian share market. IIND provides more broad exposure, with the highest allocation being Consumer Staples.
Comparing the top 10 individual holdings of the two ETFs, 6 companies are shared between the two ETFs, meaning a significant amount of crossover between the two ETFs.
Today we’ve looked at the two new Indian ETFs on the ASX, but not at why Investors would seek exposure to India? With a population of 1.3 billion people, a growing middle class, and a democratic government it is easy to see why investors may be excited about its potential.
The good news for investors is they now have two ASX listed options to invest in this potential.