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 (NSE). This allows investors to access equities in India, which has been particularly heavily hit by the COVID-19 pandemic in recent weeks. Some of India's largest companies include India Oil Corp. (IOC), Bharat Petrol Corp. (BPCL), and Tata Motors Ltd. (TATAMOTORS). Both the returns and risks in emerging-market economies can be high. The risks may be especially heightened due to the ongoing pandemic and the negative impact it is having on the global economy.
- Indian equities outperformed the broader market over the past year.
- The India ETFs with the best 1-year trailing total return are SMIN, EPI, and NFTY.
- The top holding of each of these funds is Adani Total Gas Ltd., Housing Development Finance Corp. Ltd., and Tata Steel Ltd., respectively.
There are 8 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 63.5% over the past 12 months compared to the S&P 500's total return of 50.0%, as of May 6, 2021. The best-performing India ETF, based on performance over the past year, is the iShares MSCI India Small-Cap ETF (SMIN). We examine the top 3 best India ETFs below. All numbers below are as of May 12, 2021.
- Performance over 1-Year: 94.3%
- Expense Ratio: 0.81%
- Annual Dividend Yield: 0.89%
- 3-Month Average Daily Volume: 92,324
- Assets Under Management: $307.3 million
- Inception Date: Feb. 8, 2012
- Issuer: BlackRock Financial Management
SMIN tracks the MSCI India Small Cap Index, which gauges the performance of small-cap firms representing the bottom 14% of companies in India's securities market. The ETF provides diversified exposure to small public companies in India. The majority of its 233 holdings operate within the materials, financial, and industrial sectors. The fund follows a blended strategy, investing in a mix of growth and value stocks. The fund's top three holdings include Adani Total Gas Ltd. (542066:BOM), a producer and distributor of natural gas and related services; Cholamandalam Investment and Finance Co. Ltd. (511243:BOM), a financial and investment services provider; and Voltas Ltd. (500575:BOM), a provider of engineering solutions that specializes in air conditioning and cooling technology.
- Performance over 1-Year: 73.0%
- Expense Ratio: 0.84%
- Annual Dividend Yield: 0.78%
- 3-Month Average Daily Volume: 816,650
- Assets Under Management: $819.0 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 are 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 market capitalization. It focuses on large-cap companies across the Indian economy, with financials, information technology, and materials among the sectors receiving the largest allocations across hundreds of holdings. The fund's top three holdings include Housing Development Finance Corp. Ltd. (500010:BOM), a provider of housing finance; Infosys Ltd. (500209:BOM), a provider of IT consulting and software services; and Reliance Industries Ltd. (500325:BOM), a manufacturer of petrochemicals, synthetic fibers, textiles, and more.
- Performance over 1-Year: 65.2%
- Expense Ratio: 0.80%
- Annual Dividend Yield: 0.63%
- 3-Month Average Daily Volume: 30,436
- Assets Under Management: $74.6 million
- Inception Date: Feb. 14, 2012
- Issuer: First Trust
NFTY is a large-cap fund which targets the NIFTY 50 Equal Weight Index. The index is an equally weighted collection of the 50 largest and most liquid securities listed on the National Stock Exchange of India. NFTY is a blended ETF, combining value and growth stocks among its 51 holdings. The top holdings of the fund include Tata Steel Ltd. (500470:BOM) and JSW Steel Ltd. (500228:BOM), both of which are steel manufacturing companies; and Hindalco Industries Ltd. (500440:BOM), an aluminum and copper manufacturing company.
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