Index Insights: Big Shifts in India’s Growth Leaders Sector Allocations
May 27, 2021
Read Time 3 MIN
India has been quietly making the case for being the best performing large emerging market globally in the last year, despite the pandemic still raging on in the country. Its strong performance has coincided, through April 30, with the one-year anniversary of the MarketGrader India-All Cap Growth Leaders Index (MGINGROW, or the “Index”) as the benchmark for the VanEck Vectors India Growth Leaders ETF (GLIN). The Index has fully participated in the market’s rise, earning 56.5% between April 30, 2020 and April 30, 2021 compared to 51.4% for the MSCI India Index (MXIN Index USD).1
MGINGROW consists of the 80 most fundamentally sound companies with the best prospects in India—based on MarketGrader’s proprietary score—whose shares are listed in the country’s national exchanges or in the U.S. Constituents are selected based on MarketGrader’s methodology, which gives higher scores to companies with strong growth characteristics, sound fundamental indicators of quality, and reasonable prices.
India: Large, Small or GARP?
Tracking Indian equities has been anything but straightforward in the past, with investors often choosing to give up returns by shunning the country’s small caps, in exchange for the lower volatility offered by the country’s large caps. GLIN now gives investors a third option by focusing on company selection, regardless of size, while potentially delivering better risk-adjusted returns in the long run.
Indian small caps have beaten large caps easily in the last year, with the MSCI India Small Cap Index up 91.5% through April 30 compared to a 51.4% return for MSCI India, a large cap benchmark. Volatility for both indexes was almost identical, at 21.3% for the small caps index and 21.4% for the large cap index2. The return for MGINGROW was closer to that of the large cap index, with MGINGROW up 56.5% in the last year. It did so, though, with lower volatility than both the large and small cap MSCI indices, based on its 17.5% standard deviation.
| MSCI India (MXIN Index USD) |
MSCI India Small Cap (MXINSC Index USD) |
MarketGrader India All Cap Growth Leaders (MGINGRTR Index USD) |
|
| One-Year Ending April 2021 | |||
| Return | 51.4% | 91.5% | 56.5% |
| Volatility | 21.4% | 21.3% | 17.5% |
| Return / Volatility | 2.4 | 4.3 | 3.2 |
Returns measured from 4/30/2020 through 4/30/2021. All returns are in USD. Sources: Bloomberg & MarketGrader.
Where to Now?
The most interesting observation to us following the recent March 2021 Index rebalance is how different the sector makeup looks from its historical sector breakdown, suggesting that the pandemic has created significant dislocations across all industries in the country. This may continue for some time as the country now battles its fiercest COVID-19 surge to date.
The Materials sector, which as of April 30, 2021 accounted for 23% of the index (up from 7% before the rebalance) is comprised of various Chemicals sub-industries. Asian Paints (5.27% of GLIN holdings as of 5/24/2021) and UltraTech Cement (4.44%) were both added to the index at a ~5% weight. An outsized exposure to the sector might help the Index withstand the rising inflationary pressures that have crept into global markets lately, or at least participate in some of the upside of any global inflation trade.
| Categories | Asian Paints | UltraTech Cement |
| Growth | (B+) - Solid growth indicators from top to bottom. | (B) - Acceptable indicators. |
| Value | (C) - The stock looks rich at the current valuation. | (B) - The stock looks fairly priced, offering some margin for error if fundamentals deteriorate. |
| Profitability | (A-) - Generally solid indicators. | (B-) - Average profitability indicators. |
| Cash Flow | (A) - Cash flow indicators are outstanding, giving the company ample options to fund future growth or return capital to shareholders. | (B+) - Healthy cash flows. |
Another stand out is Healthcare, sitting at 28% of the Index as of April 30, 2021 (up from 22% before the rebalance). Following the collapse of India’s health care system under the wave of COVID and the social unrest this has spawned, we wouldn’t be surprised to see this sector become a major beneficiary of long-term government spending, which could mean an elevated allocation to the sector for years to come.
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DISCLOSURE
1 Source: Bloomberg and MarketGrader. Past performance is not a guarantee of future results. Index returns are not reflective of fund’s returns. It is not possible to invest directly in an index.
2 Volatility based on annualized standard deviation. Source: MarketGrader.
This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Certain indices may take into account withholding taxes. Investors cannot invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.
The MSCI India Index is designed to measure the performance of the large and mid-cap segments of the Indian market.
The MSCI India Small Cap Index is designed to measure the performance of the small cap segment of the Indian market.
MarketGrader India All-Cap Growth Leaders Index (MGINGRNR) consists of fundamentally sound Indian companies that exhibit attractive growth potential at a reasonable price.
An investment in the Fund may be subject to risks which include, among others, investing in Indian issuers, foreign securities, emerging market issuers, foreign currency, depositary receipts, consumer staples sector, health care sector, financials sector, information technology sector, small- and medium capitalization companies, cash transactions, equity securities, market, high portfolio turnover, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares and concentration risks, all of which may adversely affect the Fund. Foreign and emerging markets investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, changes in currency exchange rates, unstable governments, and limited trading capacity which may make these investments volatile in price or difficult to trade. Small- and medium capitalization companies may be subject to elevated risks.
VanEck Vectors India Growth Leaders ETF (GLIN) is not sponsored, endorsed, sold or promoted by MarketGrader.com Corp. (“MarketGrader”). MarketGrader's only relationship to VanEck Associates Corporation (“Licensee”) is the licensing of the MarketGrader India All-Cap Growth Leaders Index (the “Index”) which is determined, composed and calculated by MarketGrader and Solactive AG, as Index Calculation Agent, without regard to Licensee. MarketGrader has no obligation to take the needs of (Licensee) or the owners of the Fund into consideration in determining, composing or calculating the MarketGrader India All-Cap Growth Leaders Index. MARKETGRADER SHALL NOT BE A PARTY TO THE TRANSACTION CONTEMPLATED HEREBY, AND IS NOT PROVIDING ANY ADVICE, RECOMMENDATION, REPRESENTATION OR WARRANTY REGARDING THE ADVISABILITY OF THIS TRANSACTION OR THE FUND OR THE ABILITY OF THE INDEX TO TRACK INVESTMENT PERFORMANCE. MARKETGRADER HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, REGARDING THIS TRANSACTION AND ANY USE OF THE INDEX, INCLUDING BUT NOT LIMITED TO ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, AND NON-INFRINGEMENT AND ALL WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING AND USAGE OF TRADE OR THEIR EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION. UNDER NO CIRCUMSTANCES AND UNDER NO THEORY OF LAW, TORT, CONTRACT, STRICT LIABILITY OR OTHERWISE, SHALL MARKETGRADER OR ANY OF ITS AFFILIATES BE LIABLE TO ANY PERSON FOR ANY DAMAGES, REGARDLESS OF WHETHER THEY ARE DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER, INCLUDING DAMAGES FOR TRADING LOSSES OR LOST PROFITS, OR FOR ANY CLAIM OR DEMAND BY ANY THIRD PARTY, EVEN IF MARKETGRADER KNEW OR HAD REASON TO KNOW OF THE POSSIBILITY OF SUCH DAMAGES, CLAIM OR DEMAND.
MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index and/or its trademark or the Index Price at any time or in any other respect. MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that MarketGrader India All-Cap Growth Leaders Index is calculated correctly. Irrespective of its obligations towards MarketGrader, Solactive AG has no obligation to point out errors in MarketGrader India All-Cap Growth Leaders Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of MarketGrader India All-Cap Growth Leaders Index by Solactive AG nor the licensing of MarketGrader India All-Cap Growth Leaders Index or its trademark for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.
“MARKETGRADER“ and “MarketGrader India All-Cap Growth Leaders Index ” are trademarks of MarketGrader.com Corp. and have been licensed for use for certain purposes by Van Eck Associates Corporation. based on the MarketGrader India All-Cap Growth Leaders Index , is not sponsored, endorsed, sold or promoted by MarketGrader, and MarketGrader makes no representation regarding the advisability of investing in such product(s). VanEck Vectors India Growth Leaders ETF (GLIN).
MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index or its trademark or the Index Price at any time or in any other respect.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
DISCLOSURE
1 Source: Bloomberg and MarketGrader. Past performance is not a guarantee of future results. Index returns are not reflective of fund’s returns. It is not possible to invest directly in an index.
2 Volatility based on annualized standard deviation. Source: MarketGrader.
This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.
Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
Index returns are not Fund returns and do not reflect any management fees or brokerage expenses. Certain indices may take into account withholding taxes. Investors cannot invest directly in the Index. Returns for actual Fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. Index returns assume that dividends have been reinvested.
The MSCI India Index is designed to measure the performance of the large and mid-cap segments of the Indian market.
The MSCI India Small Cap Index is designed to measure the performance of the small cap segment of the Indian market.
MarketGrader India All-Cap Growth Leaders Index (MGINGRNR) consists of fundamentally sound Indian companies that exhibit attractive growth potential at a reasonable price.
An investment in the Fund may be subject to risks which include, among others, investing in Indian issuers, foreign securities, emerging market issuers, foreign currency, depositary receipts, consumer staples sector, health care sector, financials sector, information technology sector, small- and medium capitalization companies, cash transactions, equity securities, market, high portfolio turnover, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares and concentration risks, all of which may adversely affect the Fund. Foreign and emerging markets investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, changes in currency exchange rates, unstable governments, and limited trading capacity which may make these investments volatile in price or difficult to trade. Small- and medium capitalization companies may be subject to elevated risks.
VanEck Vectors India Growth Leaders ETF (GLIN) is not sponsored, endorsed, sold or promoted by MarketGrader.com Corp. (“MarketGrader”). MarketGrader's only relationship to VanEck Associates Corporation (“Licensee”) is the licensing of the MarketGrader India All-Cap Growth Leaders Index (the “Index”) which is determined, composed and calculated by MarketGrader and Solactive AG, as Index Calculation Agent, without regard to Licensee. MarketGrader has no obligation to take the needs of (Licensee) or the owners of the Fund into consideration in determining, composing or calculating the MarketGrader India All-Cap Growth Leaders Index. MARKETGRADER SHALL NOT BE A PARTY TO THE TRANSACTION CONTEMPLATED HEREBY, AND IS NOT PROVIDING ANY ADVICE, RECOMMENDATION, REPRESENTATION OR WARRANTY REGARDING THE ADVISABILITY OF THIS TRANSACTION OR THE FUND OR THE ABILITY OF THE INDEX TO TRACK INVESTMENT PERFORMANCE. MARKETGRADER HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, REGARDING THIS TRANSACTION AND ANY USE OF THE INDEX, INCLUDING BUT NOT LIMITED TO ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, AND NON-INFRINGEMENT AND ALL WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING AND USAGE OF TRADE OR THEIR EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION. UNDER NO CIRCUMSTANCES AND UNDER NO THEORY OF LAW, TORT, CONTRACT, STRICT LIABILITY OR OTHERWISE, SHALL MARKETGRADER OR ANY OF ITS AFFILIATES BE LIABLE TO ANY PERSON FOR ANY DAMAGES, REGARDLESS OF WHETHER THEY ARE DIRECT, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY CHARACTER, INCLUDING DAMAGES FOR TRADING LOSSES OR LOST PROFITS, OR FOR ANY CLAIM OR DEMAND BY ANY THIRD PARTY, EVEN IF MARKETGRADER KNEW OR HAD REASON TO KNOW OF THE POSSIBILITY OF SUCH DAMAGES, CLAIM OR DEMAND.
MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index and/or its trademark or the Index Price at any time or in any other respect. MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that MarketGrader India All-Cap Growth Leaders Index is calculated correctly. Irrespective of its obligations towards MarketGrader, Solactive AG has no obligation to point out errors in MarketGrader India All-Cap Growth Leaders Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of MarketGrader India All-Cap Growth Leaders Index by Solactive AG nor the licensing of MarketGrader India All-Cap Growth Leaders Index or its trademark for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.
“MARKETGRADER“ and “MarketGrader India All-Cap Growth Leaders Index ” are trademarks of MarketGrader.com Corp. and have been licensed for use for certain purposes by Van Eck Associates Corporation. based on the MarketGrader India All-Cap Growth Leaders Index , is not sponsored, endorsed, sold or promoted by MarketGrader, and MarketGrader makes no representation regarding the advisability of investing in such product(s). VanEck Vectors India Growth Leaders ETF (GLIN).
MarketGrader India All-Cap Growth Leaders Index is calculated and published by Solactive AG. MarketGrader India All-Cap Growth Leaders Index is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using MarketGrader India All-Cap Growth Leaders Index or its trademark or the Index Price at any time or in any other respect.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.