New India Small-Cap ETF in the Works

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 |  Includes: EPI, PIN
by: Tom Lydon

India has been a fast-growing market for the last few years, and Van Eck is hoping that a small-cap ETF it has in registration will give investors even more exposure to the nation.

Van Eck has registered with the SEC for a new India small-cap ETF, reports Cinthia Murphy for IndexUniverse. The Market Vectors India Small-Cap ETF will seek to reflect the performance of the Market Vectors India Small-Cap Index. Potential investors should note that the fund will invest in the more volatile aspects of an already volatile equities market.

There are currently three ways to gain exposure to India’s economy: WisdomTree India Earnings Fund (NYSEArca: EPI), PowerShares India (NYSEArca: PIN) and iPath MSCI India Index (NYSEArca: INP). PIN and INP have exposure to large-caps; EPI has 20% weighted in mid-caps and the rest of its exposure is in large-caps.

India’s Finance Minister Pranab Mukherjee stated that the economy is in recovery, albeit in a slow one, according to RTTNews. The Prime Minister supports a rational interest rate policy moving along with fiscal measures to nurture the economy.

The Reserve Bank of India has adopted a soft monetary policy, issuing banking sector funds to aid the economy.

SBI Chairman O.P. Bhatt expects a 7% expansion in fiscal 2010, while RBI Professional forecasters revised their forecast downward to 6%, according to Outlook India.

On the upside:

  • Companies will likely ask banks for working capital loans as the IPO market picks up, which would help revive the economy
  • The auto and infrastructure industries are seeing more demand
  • Industrial production is up
  • Business confidence is on the optimistic side
  • Stock markets are strong

On the downside:

  • Private consumption demand is slowing
  • The first quarter showed a decline in corporate sales
  • A weak monsoon season has hurt agricultural output
  • Credit growth is low
  • Exports have dipped
  • PowerShares India (NYSEArca: PIN): up 64.2% year-to-date

  • WisdomTree India Earnings (NYSEArca: EPI): up 78.7% year-to-date

Max Chen contributed to this article.