Investing in India for Non residents
TLDR: Investment options for India market exposure for non residents
The emerging market space has its ups and downs. China has hogged the limelight for more than two decades, capturing the imagination of the investors worldwide with its stellar growth rate and handsome returns. Now that China is slowing down, the world as a whole is looking to the fastest growing large economy which is India.
With an economy that is growing at a rate of 7 to 8%, the investment opportunities are plentiful. I have a blog post on what i think will be expected long term trend of financial assets in India, if you want to review that first.
Those of us who can directly trade stocks/ ETFs or invest via mutual funds as Indians have it easy. But it doesn’t mean that there are no options for others (Non Residents) to get exposure to India market. A few options below.
US is the biggest ETF market so let us use that as a reference.
iShares MSCI India ETF
This ETF tracks the MSCI India index - which primarily tracks a good number of large and medium sized Indian companies. You can review the methodology and coverage of the index here on MSCI website.
This ETF tracks NSE NIFTY index - 50 largest companies by market cap. If you are really looking to invest only in Blue Chip Indian companies then this is probably the fund for you.
iShares MSCI India Small cap ETF
This ETF tracks the MSCI India small cap index. If you have higher risk appetite and are willing to go through much wilder swings in the quest for higher returns. This might be the ETF for you.
PIN - Invesco India ETF
This ETF also invests in 50 Indian equities which is selected from the largest companies listed across BSE and NSE exchanges. This ETF tracks Indus India Index.
WisdomTree India Earnings Fund
This ETF tracks profitable Indian companies which are investable by foreign investors using a fundamentally weighted index as per their objective statement. It tracks the WisdomTree India Earnings Index
This list doesn’t stop here, if you want to go beyond these ETFs listed there are other options that you try.
The Direxion Daily MSCI India Bull 3x ETF (INDL)
The Columbia India Small Cap ETF (SCIN)
The VanEck Vectors India Small-Cap ETF (SCIF)
The Columbia India Infrastructure ETF (INXX)
For those of you who are based outside of the US, these are some other non ETF options that are worth exploring
Franklin India Fund
Fidelity Funds - India Focus Fund
Aberdeen Global - Indian Equity Fund
Nomura India Equity Fund
HSBC India Equity Fund
I am sure there are a lot more funds and ETFs that track Indian market for non residents to invest in, but these are some that i could pull together as a start.
A word of caution
In 2009
1 USD = 49 INR
In 2019
1 USD = 69 INR
Investing in India market using non INR currency which would be case for most non residents involves currency risk. If you are trying to generate returns in USD terms, then the currency depreciation is a significant factor in determining your real returns, take note of this before you invest.
How do you manage your India exposure?
Do you hedge against currency depreciation?
What are your favourite ETF or fund?
Leave your comments below.
