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Sign of things to come? Indian ETF draws first inflow since July
[SAO PAULO] A small flow of funds into an Indian exchange-traded fund last week for the first time since July 19 may be a sign of things to come as a slump in oil eases the country's widening trade deficit.
Investors added US$4.13 million to the VanEck Vectors India Small-Cap Index ETF, known as SCIF, in the week ended in Nov 16. The flow represented just over 2 per cent of the capitalisation of the sixth-largest US-listed Indian ETF. Oil notched its sixth straight weekly loss, weighed down by concerns over whether Opec and its allies can reduce production enough to stanch a global supply glut.
"I like the momentum with the country as of late," said Mohit Bajaj, director of exchange-traded funds at WallachBeth Capital in Jersey City. "Weaker oil has been good for the country, helping the currency appreciate."
Crude oil - India's biggest import - has retreated from a four-year high, easing concerns about a strain on India's trade account and company profits. The slide helped Indian equities extend a three-week rally on Monday. Shares also climbed ahead of the results of a central bank meeting to discuss government demands to give up some surplus reserves and loosen liquidity norms for lenders.
There are other signs of life in the Indian ETF industry. Investors traded more than US$1.2 billion of shares in the iShares MSCI India ETF, known as INDA, in the week ending on Nov 9, the most since February and the second-largest weekly turnover since the fund's inception in 2012. INDA is the world's largest fund tracking Indian equities with about US$4.5 billion in assets.
Share prices in the ETFs have rebounded since reaching yearly lows in late October. Both INDA and the WisdomTree India Earnings Fund, known as EPI, advanced around 7 per cent this month, twice the gain seen in the biggest emerging-market equity ETF, the Vanguard FTSE Emerging Markets ETF.
ETFs dedicated to emerging-market bonds and stocks have received inflows for five straight weeks, amid signs of fading dollar strength and President Donald Trump's more moderate tone on the trade dispute.