In the previous article, we looked at the different mutual funds that invest in India and compared some of them. In the past week, the Indian stock market corrected itself where it declined from the 12,000 level to the 10,000 level. So the question at the moment is if this is a good time to invest in the Indian markets.
According to etfconnect.com, as of 5/19/2006, IFN is trading at a premium 31% to the NAV. IFN is currently trading around $47, a 10% decline from the prices in etfconnect.com. Even in the best of circumstances, IFN is still trading at a 21% premium to NAV. 21% is a huge premium to pay to invest in the Indian stock market.
IIF on the other hand, is selling for a premium of 2.45% to its NAV as of 5/22/2006. If one has to go for ETFs, IIF is clearly the better choice at the moment. Today IIF increased by nearly 5% whereas the Indian stock market increased in value by about 3%.
MINDX, Mathews India Fund, is clearly the best of the pack. Not only is there no premium associated, the expense ratios are reasonable.
ETGIX, Eaton Vance Greater India Fund. The fund carries an expense ratio of around 2.5% but the expense ratio varies from year to year. This doesnt include the front load fee that is charged for the fund. The front load fee varies from 5% to 0% depending on the money invested. While the fund is a better choice than IFN, currently it looks as though IIF and MINDX are better choices. MINDX doesnt carry the premium that IIF carries over NAV and is the best choice in the market at the moment.
That said, it is likely that the market will move sideways for the next few months in the historically slow period of May-October. The future is bright for the emerging markets in general and India in particular for the next three-four years. The current correction in the Indian market is a welcome sign for investors as the market has been showing signs of a bubble.