Australian fund manager ETF Securities released an ASX ETF in June which tracks the performance of India’s Nifty 50 stock market index. Can the ETFS Reliance India Nifty 50 ETF (ASX: NDIA) boost your returns?
India Primed For Growth
India has one of the fastest growth rates in the world when it comes to Gross Domestic Product or GDP, with growth of 6.6% in 2017 compared to 6.9% in China and 2.3% in the US. The driving forces behind the growth include urbanisation, a rising middle class and increasing consumer spending.
Many financial institutions have predicted India will be one of the fastest-growing economies in the world in the coming years, so there should be plenty of opportunity for investors.
What’s Inside The NDIA ETF?
The NDIA ETF consists of the 50 largest blue-chips in India and aims to track the NSE Nifty 50 Index.
The financials sector gets the largest allocation with 41% of the NDIA portfolio, and the largest companies include HDFC Bank Ltd (NSE: HDFCBANK) and Reliance Industries Limited (NSE: RELIANCE).
NDIA Fees & Risks
Management costs for the NDIA ETF are 0.85% per year and any dividends will be paid annually. In terms of risks, this is not a currency-hedged ETF unlike a lot of the ETFs that focus on the US or UK markets, so the investor is exposed to fluctuations in the exchange rate.
The big risk in my mind is that most investors would be investing in this ETF for diversification, however, the largest sector allocations are similar to what we have on the ASX.
It concerns me that financials make up more than 40% of the portfolio, and energy and materials both earn large allocations as well.
Besides that, a portfolio of 50 companies is smaller than what a lot of other ETFs offer, so it could be considered to be a reasonably concentrated ETF.
Summary
While growth prospects in India look exciting, I’m not convinced this ETF is the way to go right now. What’s more, the fees are relatively high. I’ll be waiting to see how this ETF performs over the next year or two before I think about investing.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
