Exploring the Opportunity in Indian Stocks: A Closer Look at the Matthews India Active ETF
The Indian stock market has seen a downturn in recent times, with many investors questioning the current weakness and its potential impact on the economy. Amidst this uncertainty, some view this as a golden opportunity to invest in a rapidly growing economy that is expected to lead the world in growth over the next decade. In this post, we will delve deeper into the current state of the Indian stock market and assess the value of the Matthews India Active ETF, which follows a bottoms-up, fundamentally driven active approach.
Why India Stocks Are Currently Underperforming
Several factors have contributed to the recent underperformance of Indian stocks. One of the primary reasons is the ongoing second wave of COVID-19 infections, which has led to renewed lockdowns and travel restrictions. Additionally, the Reserve Bank of India (RBI) has raised interest rates to curb inflation, making bonds more attractive than stocks. Furthermore, geopolitical tensions and global economic uncertainty have also taken a toll on investor confidence.
The Case Against INDE: Matthews India Active ETF
The Matthews India Active ETF (INDE) is an exchange-traded fund (ETF) that seeks to provide investment results that correspond generally to the total return of the Matthews India Equity Portfolio. However, it falls short on multiple counts when it comes to making a compelling case for investment in the current Indian stock market scenario.
Underperformance in Comparison to Peers
The Matthews India Active ETF has underperformed its peers in the India Equity category over the past year, according to Morningstar data. This underperformance can be attributed to its active management style, which has failed to outperform the index in a market that has seen significant volatility. In contrast, passive index funds have performed relatively better in the same period.
Higher Expense Ratio
Another disadvantage of the Matthews India Active ETF is its higher expense ratio. The fund charges an annual expense ratio of 0.78%, which is significantly higher than the average expense ratio for India Equity ETFs. This higher cost can eat into investors’ returns, making it less attractive compared to other investment options.
Impact on Individual Investors
For individual investors, the underperformance of the Matthews India Active ETF and the broader Indian stock market may not be cause for alarm. Instead, it presents an opportunity to buy stocks at lower prices and potentially benefit from the expected long-term growth of the Indian economy. However, it’s crucial to diversify your portfolio and not put all your eggs in one basket.
Effect on the World
The underperformance of Indian stocks and the Matthews India Active ETF can have a ripple effect on the world. India is the sixth-largest economy in the world and a significant contributor to global economic growth. A downturn in the Indian stock market can negatively impact investor confidence and potentially lead to a slowdown in economic growth. Furthermore, it can impact other emerging markets that are closely linked to India’s economy, such as China and Southeast Asia.
Conclusion
In conclusion, the current weakness in Indian stocks presents an opportunity to invest in a rapidly growing economy. However, the Matthews India Active ETF may not be the best investment option due to its underperformance in comparison to peers and a higher expense ratio. Instead, individual investors should consider diversifying their portfolio and investing in a mix of passive index funds and actively managed funds to capitalize on the long-term growth potential of the Indian economy.
- India’s economy is expected to be the fastest growing over the next decade.
- The Matthews India Active ETF underperforms its peers and has a higher expense ratio.
- Individual investors should consider diversifying their portfolio and investing in a mix of passive and active funds.
- The underperformance of Indian stocks can negatively impact investor confidence and potentially lead to a slowdown in economic growth.
