FLIN - FLIN: A Great Way To Get Exposure To India

2023-11-13 23:48:01 ET

Summary

• Franklin FTSE India ETF is a cost-efficient option for investors seeking exposure to India's high-growth potential.
• FLIN's portfolio consists of large and mid-cap Indian stocks, with top holdings including Reliance Industries, HDFC Bank, Infosys, Tata Consultancy Services, and Axis Bank.
• The Fund offers diversification, growth potential, and a low expense ratio, but investors should be aware of market risk, currency risk, and regulatory risk.

As an investor, you may be seeking opportunities outside of your domestic market to diversify your portfolio and tap into high-growth potential. India fits the bill, which is why the Franklin FTSE India ETF ( FLIN ) is worth a look. FLIN aims to closely match the performance of the FTSE India RIC Capped Index, before accounting for fees and expenses. This index represents the performance of large and mid-capitalization stocks in India, providing a broad snapshot of the country's economic activities. The fund managed assets worth $457 million with an expense ratio of 0.19%, making it one of the more cost-efficient options among India-focused ETFs.

The argument for investing in India is real. The country's robust economic growth and potential are undeniable. India has seen significant foreign direct investment and has a large, young population that contributes to a dynamic and growing workforce. Investment in infrastructure, global competitiveness, innovation, and increasing economic influence are other noteworthy factors. The country's digitalization is also creating new opportunities, making it an enticing prospect for investors. Additionally, India's government reforms, favorable demographics, and competitive labor prices are added incentives for investment. Finally, India's diverse economy offers a wide universe for stock pickers, further enhancing its appeal.

Delving into FLIN's Top Holdings

The FLIN portfolio consists of 212 holdings, with a focus on large and mid-cap Indian stocks. However, the fund maintains a cap on the exposure to individual companies to ensure diversification. Top holdings include:

1. Reliance Industries Ltd. (RIL) : RIL is a conglomerate with diverse business operations spanning sectors like petrochemicals, textiles, telecommunications, and retail. It holds the largest share of the FLIN portfolio.

2. HDFC Bank Ltd. : HDFC is one of India's largest private-sector banks, offering a range of financial products and services to individuals and corporate customers.

3. Infosys Ltd. : Infosys is a global leader in IT consulting and software services, catering to clients across different industries and geographies.

4. Tata Consultancy Services Ltd. : TCS is another prominent player in the IT services and consulting space, with a presence in multiple countries.

5. Axis Bank Ltd. : Axis Bank is another leading private-sector bank in India, offering a variety of banking and financial services.

Sector Allocation in FLIN's Portfolio

FLIN's portfolio provides exposure to various sectors in the Indian economy, with the largest allocation in Financials.

This distribution reflects the fund's strategy to maintain a balanced exposure across various sectors, avoiding over-reliance on a single sector, despite Financials being the largest.

Comparing FLIN with Other Similar ETFs

Three popular alternatives are the iShares MSCI India ETF ( INDA ), the WisdomTree India Earnings ETF ( EPI ), and the iShares S&P India Nifty Fifty Index ETF ( INDY ). All these ETFs, including FLIN, offer exposure to Indian equities. However, they differ in terms of their number of holdings, expense ratios, and sector allocations. Over the last 3 years, FLIN has performed second best.

Evaluating the Pros and Cons of Investing in FLIN

Investing in FLIN, like any investment, comes with its set of advantages and potential risks.

Pros :

1. Diversification : By investing in FLIN, investors gain exposure to a diverse range of Indian companies across various sectors.

2. Growth Potential : India's economy is forecasted to grow meaningfully in the years ahead.

3. Low Expense Ratio : With an expense ratio of just 0.19%, FLIN offers a cost-efficient way to invest in the Indian market.

Cons :

1. Market Risk : Like any investment, FLIN is subject to market risk. The performance of the fund's underlying assets can fluctuate due to changes in the economic and political climate in India.

2. Currency Risk : As the fund's assets are denominated in Indian Rupees, investors are exposed to currency risk. Changes in the exchange rate between the Rupee and the investor's home currency can impact the fund's returns.

3. Regulatory Risk : Changes in regulations or policies in India can impact the performance of the companies in the fund's portfolio.

The Verdict: Is FLIN Worth Investing In?

Given India's robust long-term growth story, FLIN presents an appealing investment opportunity. It offers a cost-efficient and diversified way to gain exposure to the Indian market. India's growth story is compelling, and FLIN offers an efficient channel to capitalize on this growth. I like this as part of an international allocation and likely would overweight it compared to other foreign investments.

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