7 ETFs I’d like to see in India

by Manshu on May 23, 2011

in ETF

Arif commented on yesterday’s post that I had misinterpreted the question, and it was in fact a question about variety of ETFs, and not Options on ETF.

I don’t know if I misinterpreted or not, since Amruta who originally posted the comment hasn’t responded yet, but I think that the question of which new ETFs should be introduced is an interesting one, and I’ve often thought about this.

Here is a list of 7 ETFs that I’d like to see launched in the Indian market. Apart from the silver ETF, I haven’t ever read about anything else being considered so think of these as just my wish-list, and not something that’s likely to be launched in the near future.

1. Silver ETF: There’s been a lot of interest in silver for the last year or so, and I think this is one ETF that a lot of people want. Like the gold ETFs, this will hold physical silver and will be like SLV that trades in the US.

2. Oil ETF: There are no oil ETFs in India, and I think this will also be a good product that will give people exposure to oil. It will be good if the oil ETF actually owned oil barrels, but I don’t know of any oil ETF in the US that does it, so I don’t know how feasible it will be to launch such an ETF in India.

3. Copper ETF: People say copper has a PhD in Economics since it tracks the economy so well, and I think this will be a good ETF as well. I’d like this to be similar to the gold ETF, and own physical copper instead of just owning stocks that engage in copper mining.

4. Canada ETF: I’ve always felt it strange that most of the international ETFs and mutual funds in India track other emerging countries and not developed countries. The stocks of developed countries are less volatile and have the scope of offering diversification to Indian investors who have to deal with a lot of volatility in their domestic market.

5. Germany ETF: Reasons are similar to the Canada ETF, and this is a developed and probably the strongest European country of the day. It may be a good idea to get exposure to this.

6. Australia ETF: In addition to being a developed country – Australia is big on natural resources, and a natural beneficiary of China’s rise, and this might be a good asset to own in the future.

7. INR – USD ETF: There are no currency ETFs right now, and this can be another area that can be useful for people, especially those who are invested in stocks abroad, and want some currency exposure as well.

So, this is my wish-list and some of the ETFs that I’d like to see in India; what about you? Which ETFs would you like to see launched in India?

{ 16 comments… read them below or add one }

Sumant May 23, 2011 at 7:07 pm

while in the subject of ETFs, can someone explain what justifies such high expense ratios? Given that they don’t have to hire any fund manager and hardly advertise at all, i’d have expected the expense ratios to be in the same league as it is abroad (0.1%). Yet, typical expense ratio of Indian ETFs is 0.5% – 1% or even more. And the tracking error too is higher in India than the west. It’s not that the Indian market lacks liquidity.

Reply

Manshu May 23, 2011 at 7:27 pm

I think it’s because the market is not as competitive as the US where you have quite a few ETFs tracking the same thing and have to compete on price.

Reply

Sumant May 23, 2011 at 8:20 pm

Thanks.
In other words, the companies would rather milk the existing customers rather than invest in creating a larger market. why am i not surprised?

Reply

Ibrahim May 23, 2011 at 7:58 pm

A financial sector ETF similar to XLF would be interesting which tracks Indian financial institutions. And hopefully the Indian version is more trust worthy than XLF where the “health” of the sector is based on cooked books.

Another interesting one would be an agri-business ETF (similar to MOO). I expect companies like Mosanto and Cargill to slowly but surely creep into Indian agriculture growth where average farmers are quitting due to weather and resource issues.

Reply

Subodh May 23, 2011 at 10:10 pm

What is you opnion on investment in ETF? Do you think investment is good directly in the asset, for eg gold,silver, real estate or should it be done in corresponding ETF?

Reply

Manshu May 24, 2011 at 8:37 am

In general, I’m in favor of being as close to your investment as possible, so I favor buying gold directly rather than an ETF.

But buying gold for investment is not a simple thing because you can’t sell it without getting a lot of deductions, and you can never be sure if you got the purity that you were promised or not. So, if I had to buy gold as an investment (which I absolutely don’t) I’d go with a gold ETF.

Reply

neha1101 May 27, 2011 at 9:23 pm

Dear Sir
I would like to know the following:- In Gold ETF, I buy say units by paying INR. What actually do the fund house do with our money. Do they buy the equivalent amount of Gold and keep it as an asset on our behalf. The reason why I ask is… for some reason the fund house go bankrupt will we get our money back by the liquidator selling the physical gold held by the fund house. Is these funds secure… Like for example in case of a mutual fund we know they buy shares using our money… is it the same with gold and if so where do they keep these gold.
Sorry to ask these stupid question but would appreciate if someone could advise me on this.

Reply

Manshu May 28, 2011 at 10:18 am

They’re valid questions Neha, and a lot of people have asked them here. The ETFs hold gold as underlying and they release half yearly reports that show how much quantity they own. This can be found in their annual report. So, unless there’s a fraud there is gold that backs the gold ETFs.

Reply

sanjay pathak June 7, 2011 at 1:50 am

Dear Team,
Just wanna sharing that in place of going direct shopping for Gold is quite understandale but with the passage of time if one is saving good amount by going for gold etf and then purchasing the same. is nt a good option ?

Reply

Manshu June 7, 2011 at 7:31 am

Yes, that’s a good option, and probably makes more sense also if you’re buying smaller quantities.

Reply

sanjay pathak June 7, 2011 at 1:54 am

Secondly saving through gold etf One is getting atleast 10% return as well. I personally want to suggest every individual to blindly going for this option but better check your budget as to how much you can easily invest in Gold etf as some other liabilities might also require his/her investment…

Regards
Sanjay Pathak

Reply

Manshu June 7, 2011 at 7:32 am

The return is because gold prices are moving up, if gold prices fall then the price of gold ETF will also go down, so blindly buying gold ETF is probably not all that good an idea 🙂

Reply

rohit June 15, 2011 at 12:03 pm

hi boarders

i dunno if ppl are aware of NSEL (national spot exchange ltd)..they have introduced products like e-gold/silver/copper for people like us who are interested in investing in these commodities just like we invest in stock market (in delivery form)…its unlike mcx/ncdex where you trade on margins and m2m is settled daily…
so etf interested/wannabes till the time variety of etfs are not introduced you can open and a/c in nsel & invest in these commodities in dematerialized form!! here 1 unit is equivalent to 1kg…

regards
rohit
9099926768

Reply

Vish June 16, 2011 at 2:45 am

On a side note, I would love to see some good India ETF in US. None of the listed ones are any good (EPI, SCIF, SCIN, etc). Would love to see a largecap and midcap combo ETF

Reply

Manshu June 17, 2011 at 12:48 am

I’d say INDY is pretty good Vish, have you checked that out? Here is an older post about such ETFs; you might find it useful.

http://www.onemint.com/2011/04/20/india-etf-funds-listed-in-us-which-one-did-best/

Reply

Mayank Gupta December 11, 2011 at 10:00 am

Introducing country ETF and oil ETF would help to diversify your portfolio but it is wide open to volatility like Oil ETFs

Reply

Cancel reply

Leave a Comment

Previous post:

Next post: