India ETFs: Benefits, Risks, How to Invest


Investing in India ETFs is a way to geographically diversify your portfolio and allows you to trade a range of companies from the second most populous nation on the planet and in one of the largest emerging markets right now. Indian ETFs replicate the performance of baskets of stocks traded on the National Stock Exchange of India Ltd. (NSE), where some of the country’s largest companies are listed.

India ETFs: What they are

We are used to thinking that Indian manufacturing is primarily based on the manufacturing sector, which is quantitatively true. However, although more prevalent, this sector does not generate enough profits to enter the stock market. The richest companies listed on the stock exchange belong mainly to the world of services, information technology, banking and finance, as well as raw materials and the automotive industry.

ETFs are a great way to access the Indian stock market, as although it is not restricted by China, currently stocks are only accessible to institutional investors. Exchange Traded Funds faithfully replicate the performance of the reference indices and allow the investor to be aware of the risk and return profile of the securities that compose them, since the prices are updated in real time. In this way the investor can decide to modulate the timing of his investment according to his objectives, choosing either intraday or medium/long term. 

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The Best ETFs on India: Quotation and Technical Analysis

We have seen how ETFs are one of the best financial products when we talk about the Indian stock market, let’s see which ones have had the best returns in the last year. 

Amundi MSCI India ETF

Amundi MSCI India is a fund that aims to replicate the performance of the MSCI India index through synthetic replication, meaning that it does not invest directly in the securities that make up the index, but in a portfolio of securities whose performance is exchanged with a counterparty through a swap contract.

This ETF was launched in 2018 with domicile in Luxembourg and is listed in euros, without hedging against currency risk. The annual fee is 0.80% for maintenance and to date it manages over €120 million. Dividends are managed by accumulation, meaning they are not distributed but reinvested to increase the value of the ETF’s units.

Its constituent companies belong mainly to the technology and financial sectors and the most relevant are Reliance Industries Limited, Housing Development Finance Corporation, Infosys Technology Limited.

iShares MSCI India Small Cap ETF

The composition of this ETF is identical to that of Amundi, with the same dividend policy. However, there are differences that should not be underestimated: it is listed in dollars, so it may be an advantage for some investors who primarily use this currency on some online broker sites, and the maintenance fees are much lower, as they stand at 0.65%. 

Lyxor MSCI India UCITS ETF 

Lyxor MSCI India UCITS also replicates the performance of the MSCI India stock index, again via synthetic replication and long strategy. However, this is a longer-lived financial product, as it was created in 2006 and therefore has a denser history to analyze. It is domiciled in France and listed in Euro.

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Like the previous ones, it does not distribute dividends but adopts an accumulation policy, while the maintenance commissions are decidedly high, 0.85% per annum. Lyxor operates with assets of over 640 million euros per year. Again, the most important companies are those mentioned for the first two ETFs.

ETF Xtrackers Nifty 50 Swap UCITS 

The last ETF to analyze for investing in India is Xtrackers Nifty 50 Swap UCITS ETF 1C, which seeks to represent the performance of the Nifty 50 index, again with synthetic replication.

Its history is similar to that of Lyxor, as it was created a year later. It is domiciled in Luxembourg and the currency used is the dollar. Again, we do not have dividend payout but accumulation and the maintenance cost is 0.85% per year. The capital under management is more than 100 million euros. 

How to Invest in ETFs

To invest in this asset, you can contact a financial advisor, a bank or a SIM (Società di Intermediazione Mobiliare,) or register with an online broker. One of the best known and listed in Europe is eToro: opening an account on the site is free and no commissions are charged on transactions.

To start investing you don’t need a large amount of money, but an initial deposit of $50 is sufficient. For those who want to practice a bit before starting to invest seriously, there is a demo account with $100,000 virtual (for which no deposit is required, only registration). 

Advantages and Risks of Investing: Is it worth it?

The Indian market certainly does not have the same scope as the Chinese one, however, those who decide to invest in Indian ETFs do so because they are betting on the potential of this great country that has grown a lot in recent times, especially in the tertiary sector, and that analysts see in strong recovery for 2022, after having suffered a major crisis due to the pandemic.

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The advantage of investing in passively managed funds is that they guarantee good liquidity at low costs and a certain constancy. In contrast, actively managed ones are subject to higher volatility.

One of the problems linked to Indian ETFs concerns currency risk: trading in India takes place in rupees, so it is necessary to pay attention to the exchange rate, since when this is unfavorable it could nullify the gains deriving from the investment. The Indian ETFs we have mentioned do not have a “currency hedge” and even if the conversion into euros or dollars of everything in the fund is automatic, there is no currency hedge.


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