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PowerShares plans to list India ETF with direct local investment

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Chicago-based PowerShares Capital Management, an Invesco group subsidiary that specialises in exchange-traded funds, has announced plans to list the PowerShares India Portfolio in mid- to

Chicago-based PowerShares Capital Management, an Invesco group subsidiary that specialises in exchange-traded funds, has announced plans to list the PowerShares India Portfolio in mid- to late-February on NYSE Arca.

Unlike other ETFs which use derivatives or notes to offer indirect exposure to Indian securities, the PowerShares India Portfolio will offer direct exposure to the country by owning local equities.

Last month New York-based WisdomTree Investments announced that the WisdomTree Trust would launch an earnings-weighted India ETF in the second half of March. The fund was the first ETF offering pure exposure to local Indian securities to be cleared for launch by the US Securities and Exchange Commission.

The fund is based on the Indus India index, which seeks designed to track the performance of the Indian equity markets as a whole with representation across the IT, health sciences, financial services, heavy industry and consumer products segments.

The rules-based index, which is compiled by Indus Advisors, is rebalanced quarterly and selects 50 components from a universe of India-domiciled companies listed on the National and Bombay stock exchanges.

‘The index on which the PowerShares India Portfolio is based is designed to be the proxy for investible assets into the Indian market,’ says PowerShares president and chief executive Bruce Bond.

‘India is one of the fastest-growing economies in the world, and it also boasts the globe’s second-largest population and fourth-largest GDP. We believe the India Portfolio is an excellent choice for investors seeking diversified access to a broad portfolio of Indian securities.’

The PowerShares India Portfolio aims to trade at or near net asset value, which the firm says removes the trading risks associated with exchange-listed India products that use derivatives and local share-linked structures.

‘Because India imposes certain restrictions on foreign holdings, any investible India index must explicitly address these limits, as well as current foreign holdings,’ says Ranga Nathan, managing director of Indus Advisors. ‘The Indus index does this through a propriety measure of capitalisation for foreign investment that is more relevant than market or float-weighted capitalisation.’

PowerShares Capital Management offers a family of more than 100 US and international exchange-traded funds that seek to outperform traditional benchmark indices. PowerShares ETFs have franchise assets of more than USD35bn and trade on all three US stock exchanges.

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