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Filling Potholes in India

|Includes:EGShares India Infrastructure ETF (INXX)
Emerging Global Shares launched a new India Infrastructure fund, INXX, last month, as part of its growing palette of Emerging Market sector funds.

The poor condition of India's infrastructure has been an issue for years, and the factor most often cited as holding India back from the kind of industrial development that has made China such a powerhouse in recent years. And in April, the government announced a new initiative in infrastructure spending to begin to address the problem.
Investors seem to have become motivated, too. In less than a month, the fund has attracted over $3 million, and has traded around 30,000 shares daily this week. Having this fund is a great breakthrough, since few or none of these companies have previously been accessible to Western investors.
Although the sector has great long-term potential, it's hard to predict how this fund will perform near-term. The government initiative is emphasizing road-building, but the biggest industry in INXX is electricity (23%), and the biggest single holding is GAIL India, a natural gas production and transmission company (7%). It may be some time before these utilities benefit from the growth of infrastructure. And the stocks are not cheap, with an average P/E of 20 and P/B near 4.0.
Details on the fund can be found at http://www.egshares.com/india.cfm

 


Disclosure: No position
Stocks: INXX