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 benefit from India's economy, which until the COVID-19 pandemic had expanded faster than many developed nations in recent years. 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 in 2020 due to the ongoing pandemic and the negative impact it is having on the global economy.
- India ETFs significantly underperformed the broader market over the past year.
- India ETFs with the best 1-year trailing total return are INCO, PIN, and INDA.
- The top holdings of these ETFs are Hero MotoCorp Ltd., Reliance Industries Ltd., and Reliance Industries, respectively.
The India ETF universe is comprised of 7 ETFs, excluding inverse, leveraged, and other ETFs with less than $50 million in assets under management (AUM). Note that these funds target Indian stocks rather than bonds. As of August 5, 2020, the MSCI India Index, a benchmark for this group of funds, had a 1-year trailing total return of 1.4%, far underperforming the S&P 500's 1-year trailing total return of 19.3%. The best-performing India ETF for Q4 2020 is the Columbia India Consumer ETF (INCO). Below, we'll take a look at the top 3 India ETFs as measured by 1-year trailing total returns. All numbers in this story, other than the benchmark indexes above, are as of August 9, 2020.
- 1-Year Trailing Total Returns: 8.5%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.30%
- 3-Month Average Daily Volume: 8,698
- Assets Under Management: $77.5 million
- Inception Date: August 10, 2011
- Issuing Company: Columbia Threadneedle Investments
INCO is a large-cap ETF primarily focused on India's consumer discretionary sector and tracks the Indxx India Consumer Index, a 30-stock index comprised of common stocks that are listed on National Stock Exchange and Bombay Stock Exchange. INCO's top 10 holdings account for about half of invested assets. Its top three holdings include Hero MotoCorp Ltd. (HEROMOTOCO), a motorcycle and scooter maker; Britannia Industries Ltd. (BRITANNIA), a manufacturer of food products and general merchandise; and Mahindra and Mahindra Ltd. (MM), a vehicle manufacturer.
- 1-Year Trailing Total Returns: 3.8%
- Expense Ratio: 0.82%
- Annual Dividend Yield: 29.7%
- 3-Month Average Daily Volume: 30,138
- Assets Under Management: $91.3 million
- Inception Date: March 5, 2008
- Issuing Company: Invesco
PIN is a large-cap ETF that follows a blended strategy of investing in a mix of value and growth stocks. PIN closely tracks the Indus India Index, which is comprised of 50 of India's biggest companies in sectors such as information technology, health services, financial services, heavy industry, and consumer products. The ETF holds multiple stocks at double-digit percentages in its portfolio. The ETF's top three holdings include Reliance Industries Ltd. (RIL), a manufacturer of petrochemicals, synthetic fibers, and textiles; Infosys Ltd. (INFO), a consulting and software services company; and Housing Development Finance Corp. Ltd. (HDFC), a provider of housing finance.
- 1-Year Trailing Total Returns: 0.6%
- Expense Ratio: 0.69%
- Annual Dividend Yield: 0.33%
- 3-Month Average Daily Volume: 4,995,288
- Assets Under Management: $3.0 billion
- Inception Date: February 2, 2012
- Issuing Company: iShares
INDA is a large-cap ETF that follows a blended strategy, investing in a mix of value and growth stocks. The fund is comprised of about 70 different components and tracks the MSCI India Index. INDA has one of the cheapest expense ratios among India ETFs, and may attract cost-conscious, buy-and-hold investors. The ETF's top three holdings include Reliance Industries, Infosys, and Housing Development Finance.