India ETFs & Private Equity’s Favorite Sectors In India (INCO, SCIF, INXX)
Christian Magoon: India ETFs have branched out over the last few years from simply tracking broad based market indicies to providing targeted exposure within India. Examples of these new types of India ETFs include the India Consumer ETF (NYSEARCA:INCO) and the India Small Cap ETF (NYSEARCA:SCIF). Now a recent report on private equity investing in India released by the Indian Corporate Affairs Minister highlights the areas of opportunity that private equity investors see in India. They include: Infrastructure, Education, Health Care and Renewable Energy.
Currently only one of these opportunities is covered in the universe of India ETFs – infrastructure. The EG Shares Indian Infrastructure ETF (NYSEARCA:INXX) focuses on 30 of the leading companies involved in the Infrastructure space. Here’s a snapshot of INXX from the IndiaETFs.com INXX profile page.
However the three other areas of opportunity mentioned – Health Care, Education and Renewable Energy – aren’t currently tracked by a specific India ETF. Health Care seems like the most likely sector to be added to the list of India ETFs as it is contains many more types of companies from health care providers to pharmaceutical companies to medical device makers. In addition, the Health Care sector has traditionally been a defensive sector which could have appeal to investors in Indian markets looking for a less volatile concentration of equities. A quick review of some of the largest India ETFs shows only marginal exposure – about 5% – to the Health Care sector.
Clearly, there is at least one opportunity for an ETF provider to fill in a hole in the India ETF marketplace. Private equity interest is generally considered to be a leading indicator of outperformance and it will be interesting to see if ETF providers see it the same way.
The four areas of private equity interest – Infrastructure, Education, Health Care and Renewable Energy – all suggest the potential for substantial improvement and development within India which could lead to more economic growth. This is a bullish sign for investors in India ETFs and citizens of India as India continues to head towards becoming the most populated nation in the world by 2020.
Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. Follow him on Twitter@ChristianMagoon. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011, Financial Planning magazine dubbed Christian an “ETF Pioneer.”