Two New India ETFs

Last time, i wrote about ETF and its different aspects.Now m bringing specifically India ETF.

Two India-focused exchange traded funds or India ETF, have become available in 2008, one being the WisdomTree India Earnings Fund (EPI) and the PowerShares India Portfolio (PIN).

Starting off with the Wisdom Tree India Earnings Fund (EPI), the fund seeks investment results that correspond to the price and yield performance, before fees and expenses, of the WisdomTree India Earnings Index.

WisdomTree’s fund, as its name implies, is based on an earnings-weighted index of 150 companies. It’s made up of companies listed on the Indian National Stock Exchange or the Mumbai Stock Exchange that issue ordinary common shares that are eligible for foreign ownership. Each company has a minimum $200 million market cap, $5 million in earnings in the fiscal year before the screening date and a price-to-earnings ratio (P/E) of at least 2. Each September, the index is rebalanced.

Because of India’s restrictions on foreign investment, the index’s creators aimed to build a broad index. The dividend payout ratio and dividend yield in the India stock market are among the lowest in the developing world, thus the decision to go by earnings.

The PowerShares fund, on the other hand, used a patent-pending proprietary method to build an index "as investable as possible" while getting around the country’s restrictions.

It’s made up of 50 of the largest Indian stocks, weighted by "IndusCap," a methodology that specifically addresses the foreign ownership limits. PowerShares believes it will deliver a more accurate representation of the capitalization in each company than market-cap or float-weight.

Here are the top Holdings for the WisdomTree India Earnings Index Fund as of 09/03/2008

1. Reliance Industries Ltd	14.49%
2. Oil & Natural Gas Corp Ltd	8.39%
3. Infosys Technologies Ltd	7.48%
4. Bharti Airtel Ltd	5.72%
5. ICICI Bank Ltd	3.25%
6. Hindustan Unilever LTD	2.38%
7. Sterlite Industries India Ltd	2.12%
8. Reliance Communications Ltd	2.11%
9. Satyam Computer Services Ltd	2.09%
10. Indian Oil Corp Ltd	1.81%

And here is the breakdown of the PowerShares India Portfolio (PIN) by Holdings as of 09/04/08

Infosys Technologies Ltd.	11.01%
Reliance Industries Ltd.	9.62%
Oil & Natural Gas Corp. Ltd.	8.75%
Reliance Communications Ltd.	4.96%
Hindustan Unilever Ltd.	4.39%
Reliance Petroleum Ltd.	4.15%
Bharti Airtel Ltd.	3.93%
HDFC Bank Ltd.	2.70%
Indian Oil Corp. Ltd.	2.34%
NTPC Ltd.	2.29%

Who will come out ahead as the top performer? Which index will work best with India’s complicated rules regarding foreign investing? Only time will tell on this one.