GDP growth in India has declined for six straight quarters in a row, with the most recent figure surprising analysts and bringing India ETFs into focus.
India ETFs see positive returns
India’s GDP grew 5.7% between April and June, a three-year low, while economists had expected 6.5% growth. Finance minister Arun Jaitley said the slowdown was temporary and claimed it was due to manufacturers destocking their inventories.
UBS predicts India’s 2017 GDP growth to reach 6.6%, down from 7.2% previously.
The figures come as oil prices are at a record low, while foreign direct investment is at a record high, having grown 37% to $10.4 billion in the second quarter compared to $7.5 billion in the same period the year before. FDI growth is expected to boost the currency.
The Reserve Bank of India, the country’s central bank, cut the repo rate by 25 basis points earlier this year to 6%.
But the surprising GDP figures come after prime minister Narendra Modi removed 86% of the currency in circulation in November to stop corruption. The RBI said most of the banned money has returned into the system and lost money printing new notes.
Modi has also introduced tax reform this year, aiming for a “one nation, one tax” regime with a new Goods and Service Tax. The new tax has impacted manufacturing, but analysts say the long-term effects should be positive.
Three India ETFs to consider
The $4 billion iShares MSCI India ETF (INDA) tracks large and mid caps and costs 0.68%. The top sectors are financials, computer software and consumer discretionary stocks, making up around 50% of the fund. It’s up 27% this year.
Another option is the WisdomTree India Earnings Fund (EPI) which has financials, energy and information technology as the top three sectors. It costs 0.83% and is up more than 30% year to date.
A third fund to consider is the iShares India 50 ETF (INDY). It costs 0.93% and allocates the top three exposures to banks, computer software and refineries/marketing.
