India ETFs gaining popularity in US

The popularity of emerging market exchange traded funds EM ETFs is soaring in the US,according to a recent release from Credit Suisse.

The popularity of emerging market exchange traded funds EM ETFs is soaring in the US,according to a recent release from Credit Suisse. Turnover in EM ETFs has risen to a quarter of NYSE turnover of late from less than 5-10 per cent in 2007.

Given that many expect low returns in home assets,local savers of developed economies are increasingly seeking growth markets like India. ETFs provide them with a quick and easy route. These investors could prove a more consistent and larger investor class than the more talked about sovereign wealth funds or pension funds, says Nilesh Jasani,analyst at Credit Suisse. Assets under management in India ETFs and exchange traded notes ETNs are only US1.3 billion versus US9-10 billion in China and Brazil funds. Indian ETFs in the US started late because of FII-related regulations and restrictions. The one ETN that started in 2007 suffered from the October-2007 P-Note regulation changes.

Funds invested through the ETF route are expected to surpass US10 billion by 2011,depending on local fundamentals.

RBI warns consumers

The Reserve Bank of India RBI has recently warned consumers against being duped by unscrupulous entities. The RBI has noticed that certain entities issue advertisements in newspapers offering personal loans,loans against property,etc.,at very low rates of interest. In the advertisements,these entities indicate their mobile phone numbers. The RBI has found that some of these entities cheat the public: they charge processing fees upfront and then disappear. Some of these entities falsely claim to have been registered with the RBI. The RBI has advised the public to verify the credentials of entities they deal with.

Status quo on rates likely: Citi

The backdrop against which the RBIs monetary policy will be announced on July 28 is as follows: one,signs of a nascent recovery but deficient monsoons casting a shadow; two,benign WPI inflation but soaring food prices; and three,ample liquidity in the system but a near doubling of the governments borrowing programme. Given the above and that since the financial crisis the RBI has aggressively cut policy rates repo rate by 425 basis points bps to 4.75 per cent; reverse repo by 275 bps to 3.25 per cent; and CRR by 400 bps to 5 per cent,we expect it to maintain the status quo on rates,ensure adequate liquidity,and start tightening in 2Q 2010, says Rohini Malkani,economist,Citi India. Given the uncertainty on the monsoons,the RBI could stick with its 6 per cent GDP estimate made prior to the positive election results.