Top 3 Mutual Funds to Capitalize on India’s Growth

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Top 3 Mutual Funds to Capitalize on India’s Growth

Indian economy for article
The Indian economy is expected to grow by 7.2% during fiscal year 2015, according to the OECD, which far exceeds forecasts for a 2.9% global average. In 2016 and 2017, the economy is expected to accelerate to 7.3% and 7.4%, respectively, assuming key structural reforms are implemented. This massive growth is being driven by both rising public investment and increased private-sector confidence due to better infrastructure and fewer roadblocks.

With the rout in emerging market equities, investors largely have ignored these positive economic signs, and sold off Indian equities. These dynamics could reverse over the coming quarters, as Prime Minister Narendra Modi and Central Banker Raghuram Rajan work to implement key economic reforms and drive the country’s economy higher in the face of increasing global economic headwinds caused by China and Russia.

Potential Catalysts

Investors may want to consider purchasing Indian equities through mutual funds or other investment vehicles for many different reasons.

Prime Minister Modi has taken dramatic steps to increase foreign direct investment across many different sectors. Earlier this year, he announced plans to allow 100% investment in completed construction projects, some plantation sectors, cable networks, direct-to-home services and some air transport activities, which enables foreign capital to help accelerate growth and improve infrastructure for private sector businesses.

Central Banker Rajan’s disciplined monetary policies also have helped reassure the market that the country is perfectly capable of managing inflation. Earlier this year, the central bank cut interest rates to boost growth, which led to a brief jump in equity prices. The government’s reduction of subsidies to several areas of the economy also could help reduce twin fiscal deficits that represent an overhang on the economy.

Mutual Funds to Buy

Many different mutual funds have exposure to Indian equities, but they have very different dynamics investors should carefully consider.

The most popular mutual fund is the Matthews Investor India Fund (MINDX), which has about $1.5 billion in assets under management, with a $2,500 minimum investment and 1.12% expense ratio. With broad exposure to the Indian economy, the mutual fund provides investors with a convenient way to access the emerging market, while significantly outperforming its benchmark indexes and competing funds over the past several years.

graph for article of data for em
The two other mutual funds to consider for exposure to Indian equities are the Eaton Vance Greater India Fund (ETGIX) and the ALPS Kotak India Growth Fund (INDAX). With assets of $246.3 million and $16.1 million, respectively, these funds are significantly less popular – but they do offer some interesting differences in holdings. The downside is these funds are significantly more expensive in terms of expense ratios and loads than MINDX.

The Bottom Line

The Indian economy continues to grow at a robust clip, despite the slowdown in the global economy. With favorable fundamentals in place, investors may want to take a look at buying India-focused mutual funds as a way to build exposure to the country’s economy into their diversified portfolios. The Matthews Investor India Fund (MINDX) is the most popular option in the space, but investors also should consider smaller competitors when making a decision.
Image courtesy of jscreationzs at FreeDigitalPhotos.net

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Indian economy for article

Top 3 Mutual Funds to Capitalize on India’s Growth

The Indian economy is expected to grow by 7.2% during fiscal year 2015, according to the OECD, which far exceeds forecasts for a 2.9% global average. In 2016 and 2017, the economy is expected to accelerate to 7.3% and 7.4%, respectively, assuming key structural reforms are implemented. This massive growth is being driven by both rising public investment and increased private-sector confidence due to better infrastructure and fewer roadblocks.

With the rout in emerging market equities, investors largely have ignored these positive economic signs, and sold off Indian equities. These dynamics could reverse over the coming quarters, as Prime Minister Narendra Modi and Central Banker Raghuram Rajan work to implement key economic reforms and drive the country’s economy higher in the face of increasing global economic headwinds caused by China and Russia.

Potential Catalysts

Investors may want to consider purchasing Indian equities through mutual funds or other investment vehicles for many different reasons.

Prime Minister Modi has taken dramatic steps to increase foreign direct investment across many different sectors. Earlier this year, he announced plans to allow 100% investment in completed construction projects, some plantation sectors, cable networks, direct-to-home services and some air transport activities, which enables foreign capital to help accelerate growth and improve infrastructure for private sector businesses.

Central Banker Rajan’s disciplined monetary policies also have helped reassure the market that the country is perfectly capable of managing inflation. Earlier this year, the central bank cut interest rates to boost growth, which led to a brief jump in equity prices. The government’s reduction of subsidies to several areas of the economy also could help reduce twin fiscal deficits that represent an overhang on the economy.

Mutual Funds to Buy

Many different mutual funds have exposure to Indian equities, but they have very different dynamics investors should carefully consider.

The most popular mutual fund is the Matthews Investor India Fund (MINDX), which has about $1.5 billion in assets under management, with a $2,500 minimum investment and 1.12% expense ratio. With broad exposure to the Indian economy, the mutual fund provides investors with a convenient way to access the emerging market, while significantly outperforming its benchmark indexes and competing funds over the past several years.

graph for article of data for em
The two other mutual funds to consider for exposure to Indian equities are the Eaton Vance Greater India Fund (ETGIX) and the ALPS Kotak India Growth Fund (INDAX). With assets of $246.3 million and $16.1 million, respectively, these funds are significantly less popular – but they do offer some interesting differences in holdings. The downside is these funds are significantly more expensive in terms of expense ratios and loads than MINDX.

The Bottom Line

The Indian economy continues to grow at a robust clip, despite the slowdown in the global economy. With favorable fundamentals in place, investors may want to take a look at buying India-focused mutual funds as a way to build exposure to the country’s economy into their diversified portfolios. The Matthews Investor India Fund (MINDX) is the most popular option in the space, but investors also should consider smaller competitors when making a decision.
Image courtesy of jscreationzs at FreeDigitalPhotos.net

Sign up for Advisor Access

Receive email updates about best performers, news, CE accredited webcasts and more.

Popular Articles

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.


Read Next

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