Investing in India


Gordon Pape Image Gordon Pape Editor and Publisher, The Income Investor and the Internet Wealth Builder

By comparison, the International Monetary Fund is predicting 6.5% growth for China's GDP this year.

India is also seen as less vulnerable to U.S. protectionism as it does not depend as much on exports as China.
The downside as far as investors are concerned is that India has always been a volatile marketplace, with huge market swings.

The iShares MSCI India ETF (INDA), the largest U.S. based ETF that focuses on the country, was showing a year-to-date total return of 17.9% as of April 6. But the fund posted losses in three of the four years from 2013 to 2016.

This ETF, which has almost US$4.8 billion in assets under management, tracks the performance of MSCI India Total Returns Index. It holds 78 securities. The 2016 management expense ratio was 0.65%.

If you would prefer a fund that is based just on the Nifty Fifty, look at iShares India Fifty ETF (INDY). It's a lot smaller than INDA, with about US$850 million in assets but has a slightly better performance record so far this year at 18.6%. That's despite a much higher expense ratio of 0.94%.

INDY also has a better long-term performance record. As of March 31, it was showing a three-year average annual compound rate of return of 8.4% versus 6.8% for INDA. The five-year figures were 7% for INDY and 5.6% for INDA.

Some small-cap India funds are doing even better this year, with gains of over 30%. The VanEck Vectors India Small-Cap Index ETF (SCIF) is ahead 32.8% this year while the iShares MSCI India Small Cap ETF (SMIN) is ahead 30.2%.

However, these funds tend to be more volatile than the large-cap ETFs so are only recommended for aggressive investors who can deal with the risk.