WisdomTree's India Earnings ETF

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Includes: EPI, IFF, IFN, INP, WETF
by: Geoffrey Lordi

Many have waited a long time for a chance to invest directly in India. While closed end funds and ETNs might have been the choice for some, WisdomTree (WSDT.PK) will launch the Wisdom Tree India Earnings Fund (NYSEARCA:EPI) on February 22, 2008. As with many WisdomTree offerings, the ETF will be fundamentally weighted, measuring the performance of companies incorporated and traded in India that are profitable as of the annual measurement date (of note is that WT defines earnings as net income).

Based on the WisdomTree India Earnings Index, the ETF is designed to mirror its parent index, less 0.88% operating fees, and best the performance of MSCI's India Index, at least according to available backtesting data. EPI's composition includes the following sector weightings:

  • Energy: 25.37%
  • Materials: 16.17%
  • Financials: 13.34%
  • Information Technology: 11.5%
  • Industrials:8.12%
  • Utilities: 6.08%
  • Consumer Discretionary: 5.96%
  • Telecom Services: 5.81%
  • Consumer Staples: 4%
  • Health Care: 3.64%

And the following market cap segment weights:

  • Large: 62.82%
  • Mid: 28.61%
  • Small: 8.07%
  • Unclassified, possibly microcap: 0.5%

WisdomTree affirms that EPI will select from a "broad universe" of approximately 150 companies traded on local markets. EPI's top ten holdings, as of February 20, 2008 were:

  1. Reliance Industries: 12.99%
  2. Oil and Natural Gas Corp: 6.5%
  3. Infosys Technologies (NASDAQ:INFY): 5.21%
  4. Bhartl Alrtel Limited: 3.71%
  5. ICICI Bank (NYSE:IBN): 2.99%
  6. Housing Development Finance: 2.71%
  7. Sterlite Industries (BATS:SLT): 2.4%
  8. Indian Oil Coporation: 2.35%
  9. SAIL: 2.25%
  10. Tata Steel Limited: 2.18%

Index characteristics suggest that EPI will represent nearly $1.13 trillion in market cap, and trade at a P/E of roughly 16.94, with P/B at 5.04, P/C at 13.77, and P/S at 2.48. There should be a dividend, as the parent index yields ~1.26%. But for those of you interested in chasing low R^2, WisdomTree's suggested correlation values provide only lukewarm enchantment: 0.78 to the MSCI Emerging Markets Index; 0.696 to the MSCI EAFE Index, and 0.694 to the S&P 500.

Invest soundly.

Disclosures: None