India Market Offers Diverse Investment Options: Indices, Trusts, ETFs
Investors seeking exposure to the Indian stock market today have several options, including indices, investment trusts, and ETFs. Each offers a unique approach to diversification and risk management.
The FTSE India index stands out for its increased number of stocks and lower weights for larger holdings, providing greater diversification. Four investment trusts offer access to this market: Abrdn New India (LSE: ANII), Ashoka India Equity (LSE: AIE), India Capital Growth (LSE: IGC), and JP Morgan Indian (LSE: JII).
The MSCI India index demonstrates strong sector diversification, with financials comprising approximately 25% and other sectors around 10%. However, high valuations for small growth stocks, as indicated by the MSCI India Small Cap's trailing P/E ratio of 34, warrant caution.
Ashoka India Equity and India Capital Growth have proven track records, favoring smaller growth companies. For those preferring ETFs, the iShares MSCI India ETF (LSE: IIND) and Franklin FTSE India ETF (LSE: FRIN) are popular choices. Notably, the Franklin FTSE India ETF offers a lower expense ratio and slightly better recent performance.
Investing in India, while popular, should be approached with care when using single-country funds in emerging markets. India's deep market, however, sets it apart, with the MSCI India index exhibiting less concentration than the FTSE 100. Abrdn New India and JP Morgan Indian have lagged the benchmark, focusing on large-cap, high-quality stocks.
Among small-cap funds, Quant Small Cap Fund, HSBC Small Cap Fund, and Franklin India Small Cap Fund have shown significant improvement over the past five years, targeting small growth stocks with potential value added through active stock selection.
Investors in the Indian stock market today can choose from a range of indices, investment trusts, and ETFs, each offering distinct advantages in terms of diversification and risk management. Despite high valuations for small growth stocks, the Indian stock market remains attractive, with several funds demonstrating strong performance and potential for value addition.
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