India Inflation At Record Low: ETFs In Focus

Inflation rate in India has touched a record low of 2.2% in May 2017, while it was over 11% four years ago. The inflation rate in April 2017 was 2.99%.

The fall in prices is primarily being attributed to cyclical or temporary issues, including a stronger rupee and reduced domestic demand. Moreover, structural changes by Prime Minister Narendra Modi’s government, like better food management, is also being attributed as one of the drivers for this fall in prices. The Indian rupee is up over 5.2% against the U.S. dollar so far this year.

This has led the Reserve Bank of India (RBI) to cut its inflation forecasts. The RBI revised its inflation forecast to the range of 2–3.5% from 4.5% for the first half of the fiscal year ending March. It also revised forecasts to the range of 3.5–4.5% from 5% for the second half. The Wholesale Price Index slowed to 2.17% year over year in May 2017 compared with a rise of 3.85% in April.

Moreover, the country also moved to a new base year in May to calculate its wholesale prices, in order to reduce the volatility associated with it and provide a better picture to the RBI. The calculations will take 2012 as the base year.

India’s GDP grew 6.1% in the first quarter of 2017, reflecting a decline from 7% in the previous quarter. This has put pressure on the RBI to cut rates. The RBI, however, left its repo rate, the rate at which the RBI lends to banks, unchanged at 6.25%. However, analysts are predicting a rate cut as early as August (read: India Keeps Key Rates Unchanged: ETFs in Focus).

Let us now discuss a few ETFs focused on providing exposure to the emerging market nation (see all Asia-Pacific (Emerging) ETFs here).

iShares MSCI India ETF INDA

This fund provides exposure to large and mid-sized Indian equities.

It has AUM of $5.10 billion and charges a fee of 71 basis points a year. Financials, Computer-Software and Consumer Discretionary are the top three sectors of the fund, with 23.21%, 13.56% and 12.92% allocation, respectively (as of June 16, 2017). Housing Development Finance Co, Reliance Industries Ltd and Infosys Ltd are the top three holdings of the fund, with 9.20%, 6.70% and 6.43% allocation, respectively (as of June 16, 2017). The fund has returned 19.09% in the last one year and 22.27% year to date (as of June 19, 2017). INDA currently has a Zacks ETF Rank 2 (Buy) with a Medium risk outlook (read: Why India ETFs are Soaring in 2017).

WisdomTree India Earnings Fund (TO:EPI)

This fund provides exposure to Indian equities in multiple capitalization segments.

It has AUM of $1.69 billion and charges a fee of 84 basis points a year. Financials, Energy and Information Technology are the top three sectors of the fund, with 25.99%, 20.46% and 15.39% allocation, respectively (as of June 19, 2017). Reliance Industries Ltd, Housing Development Finance Co and Infosys Ltd are the top three holdings of the fund, with 11.01%, 6.45% and 6.43% allocation, respectively (as of June 19, 2017). The fund has returned 26.76% in the last one year and 24.75% year to date (as of June 19, 2017). EPI currently has a Zacks ETF Rank 2 with a Medium risk outlook (read: India ETFs: More Run Ahead?).

iShares India 50 ETF (JK:INDY)

This fund provides exposure to large-cap Indian equities.

It has AUM of $993.06 million and charges a fee of 94 basis points a year. Banks, Computer-Software and Refineries/Marketing are the top three sectors of the fund, with 26.39%, 10.98% and 8.50% allocation, respectively (as of June 16, 2017). Housing Development Finance Co, ITC Ltd and Reliance Industries Ltd are the top three holdings of the fund, with 7.26%, 7.24% and 6.42% allocation, respectively (as of June 16, 2017). The fund has returned 23.29% in the last one year and 25.64% year to date (as of June 19, 2017). INDY currently has a Zacks ETF Rank 2 with a Medium risk outlook.

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