India ETFs, which have already enjoyed tremendous gains this year following well-received election results in May, surged again on Monday, this time as a result of several landmark agreements sealed during U.S. Secretary of State Hillary Clinton’s first visit to the South Asian nation. While disputes over how to address climate change have cast a shadow over U.S.-India relations in recent months, Monday’s breakthrough delivered concrete, tangible steps towards improved two-way trade and mutually beneficial economic endeavors.
Prime Minister Manmohan Singh told Clinton that India will grant U.S. companies the exclusive right to build nuclear power plants at two sights, a breakthrough that will “facilitate billions of dollars in U.S. reactor exports and create jobs in both countries as well as generate much-needed energy” according to Clinton. India had previously provided similar guarantees to French and Russian energy companies. The agreement with the U.S. follows last year’s landmark pact that ended a three decade ban on trading nuclear fuel and technology with India, arising from the development of nuclear weapons outside the Nuclear Non-Proliferation Treaty.
In addition, India and the U.S. reached several other key agreements, including one that allows the export of U.S. weapons and defense technology to India. Such an agreement will allow American firms, including Boeing and Lockheed Martin, to bid on a contract to supply India with 126 fighter jets. The two nations also agreed on a plan to allow American parts to be launched on civilian or noncommercial Indian aircraft.
India ETF Plays
There are a number of ETF options for investors looking to gain exposure to the India equity markets, including:
- iPath MSCI India ETN (INP – up 4.4% Monday): Linked to the MSCI India Total Return Index, INP covers approximately 85% of the Indian equity market. Since this product is an ETN, it doesn’t actually hold the underlying securities, but rather agrees to pay to its holders the return on the underlying benchmark. While this eliminates tracking error, it also opens the door to credit risk. INP has gained approximately 65% so far in 2009.
- WisdomTree India Earnings Fund (EPI – up 4.2% Monday): This ETF follows an earnings-weighted index, and offers exposure to a number of diversified sectors within India, including energy (25%), financials (14%), and materials (14%). EPI is up more than 60% in 2009.
- PowerShares India Portfolio (PIN – up 3.6% Monday): PIN tracks the Indus India Index, a benchmark that holds 50 of the largest equities listed on two main Indian exchanges. PIN is up more than 50% year to date.
In addition to the aforementioned ETFs, there are several regional options offering more balanced country exposure in addition to Indian equities, including First Trust’s FNI and Claymore’s EEB.
Disclosure: No positions at time of writing.
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