Want exposure to the bond market of one of the most promising BRICs? An ETF has been launched to make that happen.

London/Dubai-based Sun Global Investments and India-based ZyFin Holdings have listed what they describe as the world’s first Indian fixed income exchange traded fund on London’s Stock Exchange.

The fund is called the LAM Sun Global ZyFin India Sovereign Enterprise Bond UCITS ETF; it offers exposure to a basket of Indian public sector corporate bonds and will, its managers say, be Europe’s first physically replicating Indian ETF backed by real underlying securities as opposed to notional securities or derivatives. 

Launch of the ETF comes at a time when, despite some wobbles, India’s economy is often seen as one of the more promising emerging markets in coming years. The election of the Modi administration in 2014, promising reforms, has cheered investors.

The ETF tracks performance of the ZyFin India Sovereign Owned Enterprise Bond Index; the index is composed of bonds from companies of national interest that are majority-owned by the Indian government, or sovereign owned enterprises. The corporate bonds are denominated in Indian rupees, have an AAA rating and a residual maturity between four to 20 years with current average maturity of 8.97 years.

The average yield of the portfolio is close to 8.23 per cent (in rupees) which is higher than the yield of Indian sovereign bonds. All the bonds in the index are equally weighted, and no more than one bond from a company is included, the managers said in a statement.