Scalper1 News
While a flurry of weak Chinese data escalated concerns regarding sluggish global growth, it’s India that showed promises to outpace other major economies over the next few years. The World Bank along with the International Monetary Fund (IMF) indicated that India was the world’s fastest growing economy in 2015 and will continue to hold that position for the next three years, easily surpassing the former leader, China. In this scenario, ETFs having significant exposure to India may provide an excellent opportunity for investors to tap this positive trend. Weak Chinese Economy The sluggish growth condition in China remained one of the major concerns over the past one year. Recently released economic data showed that the Chinese economy is still struggling to provide a congenial economic environment. While the Caixin manufacturing PMI finished below 50 for the 10th straight month in December, the Caixin China services purchasing managers’ index PMI dropped to 50.2 in December from 51.2 in November. Multiple rate cuts and devaluations of the yuan over the past one-year period failed to resuscitate the economy. Also, the World Bank reduced its outlook for Chinese GDP growth in 2016 by 30 percentage points to 6.7%, below last year’s estimated growth rate of 6.9%, which was also below the June forecast of 7.2%. The bank also predicted that the economy may grow at a slower pace of 6.5% over the next two years. Blaming the weak Chinese economy, the bank also reduced its global growth rate forecast for 2016 by 0.4 percentage points to 2.9%. However, it remained above 2015’s estimated growth rate of 2.4%. India in a Bright Spot The World Bank projected the Indian economy to expand at a rate of 7.8% this year and 7.9% over the next two years. While the economy registered a GDP growth rate of 7.4% in the July-September quarter, the economy is expected to continue this positive trend to end the current fiscal year with a growth pace between 7% and 7.5%. Increase in activities in sectors such as manufacturing, mining and services were cited as the main drivers behind the growth in the quarter. Moreover, economic policies including rate cuts by the Reserve Bank of India (RBI) along with several measures taken by the Indian government are likely to boost the economy in the months ahead. Meanwhile, positive net FDI flows in the reserve of RBI and a significant decline in fiscal deficit also had a positive impact on the economy. It was reported that India’s fiscal deficit gradually declined from 7.6% of GDP in 2009 to currently 4%. Also, the continuing slump in prices of oil, which is one of the major imported commodities in India, had a significant effect on the Indian economy over the past one year. While the plunge in crude helped the trade deficit to remain at a controllable level, decline in prices of oil and other major commodities also restrained the inflation rate to go beyond the targeted range. The World Bank said, “In contrast to other major developing countries, growth in India remained robust, buoyed by strong investor sentiment and the positive effect on real incomes of the recent fall in oil prices.” 3 India ETFs to Buy Given the bullishness, we have highlighted three India ETFs with a Zacks ETF Rank #2 (Buy) that may prove to be profitable for investors who are interested to gain from the positive outlook of the Indian economy. Market Vectors India Small-Cap ETF (NYSEARCA: SCIF ) This fund targets the small cap segment and tracks the Market Vectors India Small-Cap Index. In total, it holds 143 securities in its basket with none making up for more than 3.27% of assets. Financials occupies the top position from a sector look at 27.7% while industrials, consumer discretionary, and information technology round off the next three spots. The fund has so far amassed $173.2 million in its asset base while charging 89 bps in annual fees. Volume is good, exchanging around 94,000 shares in hand a day. The ETF lost 0.3% over the past one-month period. EGShares India Infrastructure ETF (NYSEARCA: INXX ) This ETF provides exposure to 30 Indian stocks by tracking the Indxx India Infrastructure Index. It is pretty well spread out across components with none of the securities holding more than 5.06% of assets. With respect to sector holdings, construction & materials takes the top spot at 18.3%, followed by mobile telecommunications (14.7%), electricity (14.3%) and industrial engineering (10.2%). The product has managed assets worth $40.8 million and trades in volume of nearly 26,000 million shares a day. It has an expense ratio of 0.93% and lost 0.3% over the past one month. PowerShares India ETF (NYSEARCA: PIN ) This fund offers exposure to a basket of 50 stocks selected from the universe of the largest companies listed on two major Indian exchanges by tracking Indus India. The top two firms are Reliance Industries and Infosys (NYSE: INFY ). From a sector look, the fund is tilted towards energy and information technology, each accounting for around 20% share, followed by financials (11.5%) and healthcare (11%). The fund has amassed $430.3 million in its asset base and trades in solid volume of around 1.2 million shares a day on average. It charges an expense ratio of 85 bps and lost 0.4% in the past one month. Original Post Scalper1 News
Scalper1 News