Analyse: Lyxor ETF MSCI India

Indische Aktien haben als einziger BRIC-Markt 2012 überzeugt. Anleger haben zudem von Diversifikationseffekten profitieren können. Viel hängt künftig von der Modernisierung der Wirtschaft ab.

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Rolle im Portfolio

The Lyxor India B ETF provides equity exposure to India. As with all single country emerging market exposures, this Lyxor ETF would be best deployed as tactical tool within a well diversified portfolio. The ETF can also be deployed as a core holding complementing exposure to emerging markets in Asia and Latin America. Increased correlation with international stock markets over the past years makes the ETF less beneficial from a diversification point of view. The index correlated 77% with the MSCI World USD Index and 87% with the MSCI EM USD Index over the last five years; up from 72% and 83% respectively over the trailing ten year period. As the correlation with China remains relatively low, the ETF might be utilised as diversifier for equity exposure to China. The index correlated 45% with the MSCI China CNY Index over the last five years.

The ETF is suitable for investors believing in a story rooted in robust domestic demand streaming from the relatively young and increasingly affluent population in India. In addition, investors overweighting China can use the ETF to diversify their exposure within the emerging market equity segment of their portfolio.

Fundamentale Analyse

In contrast to China and most developed markets, India has the benefit that its young, employable population is growing. However, the country still has a long way to go in modernizing its economy. Less than 10% of the working population is employed in a regulated job, leaving the remaining 90% without health and social insurance. With around 60% of its GDP coming from domestic sources, India is significantly more reliant on the development of its internal market than most emerging markets. In fact, domestic private consumption and investment are expected to remain the main drivers of GDP growth in the near future, although increased trade is expected to make a contribution at the margin as well. The country's large English-speaking workforce has made it a centre for the outsourcing of technology services; one of the more productive and export-oriented sectors of the economy.

India has long been one of the fastest growing economies in the world. However, recently the country’s GDP growth has slowed more than expected. During the final three months of 2012 the economy expanded 4.5% y/y, down from the 5.3% expansion recorded in the preceding quarter. Economists expect GDP growth of 4.8% for the fiscal year ending March 2013, slightly below from the government’s forecast of 5%.

Despite the economy’s slowdown, the Reserve Bank of India has hesitated to cut interest rates aggressively due to a high inflation environment. The central bank cut its repo rate by 1% between April 2012 and March 2013 while cutting the cash reserve ratio by 1.5%. In addition, the bank cut its key lending rate from 7.75% to 7.5% in March after a 0.25% cut in January, though warning that high inflation and a wide current-account deficit left little room for further rate cuts. RBI cuts have not, however, been fully passed on by commercial banks.. The government remains critical of this course of action, pushing the RBI towards a faster easing of monetary policy. At the same time, the central bank demands stricter fiscal responsibility by the government. Indeed, the country’s high fiscal deficit is reason for concern as it holds back banks to reduce their lending rate.

One of the key impediments to growth facing the Indian economy is rampant corruption, which can make it difficult for entrepreneurs to start new businesses or expand operations. Currently, almost half of the government’s spending for the current fiscal year is held up in slow-moving infrastructure projects due to red tape. The lack of a proper infrastructure is hindering the economy.


The MSCI India INR index includes about 60 of the largest and most liquid stocks of publicly-traded companies trading on the National Stock Exchange of India. The index aims to hold 85% of the market capitalisation of each industry. The securities are weighed by free-float adjusted market capitalisation. Because closely held firms will have a smaller piece of their aggregate market capitalisation floated on public exchanges, the free float adjustment serves to ensure the underlying liquidity of the holdings is superior relative to a pure market capitalisation weighting. The index is reviewed four times a year. The index is very top-heavy, with about 50% of its total value comprised by the top ten constituents. The index also has a significant degree of sector concentration. Its three largest sector weightings are finance (30%), IT (17%), and energy (12%).


This ETF uses synthetic replication method to track the performance of the MSCI India total return index. To achieve this performance, the fund holds a basket of blue chip shares and enters an un-funded swap agreement with parent bank Societe Generale. The bank then gives away the performance of the MSCI India (net of fees) in exchange for the performance of the fund’s holdings. According to UCITS III regulations, individual counterparty risk exposure is limited to 10% of the fund’s NAV at any point in time. However, Lyxor has a daily target of zero swap exposure. Swaps are reset whenever their value becomes positive. They may sometimes have a negative value (between -2% and 0%), which would mean in this case that the fund owes the counterparty money. The fund’s holdings consist of highly liquid equities from OECD countries, the large majority of which are European. Lyxor does not engage in securities lending within the fund, which helps to minimise overall counterparty risk.


Lyxor charges a 0.85% total expense ratio (TER) for the ETF. This lies in the upper range of ETFs tracking Indian equities. Other potential costs associated with holding this fund which are not included in the TER include swap costs, bid-ask spreads and brokerage fees.


As of writing there are a few ETFs offering equity exposure to India. Most of the indices are tracking either the MSCI India Index or the S&P CNX Nifty Index. The largest alternative in terms of total assets under management is the swap-based db x-trackers S&P CNX NIFTY ETF. The S&P CNX NIFTY Index is a free-float-adjusted market capitalisation index, representing about 60% of the NSE. Therefore, the db x-trackers ETF represents a slightly smaller share of the Indian economy. Investors interested in a more like-for-like alternative will find the Amundi ETF MSCI India, tracking the same index as the ETF discussed here. The Amundi ETF is available in USD and EUR and also uses synthetic replication and levies a TER of 0.80%. 

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Über den Autor

Gordon Rose, CIIA, CAIA,

Gordon Rose, CIIA, CAIA,  war von 2011 bis 2014 Fondsanalyst bei Morningstar.