In the first quarter of 2010, India’s economy grew by 8.6% compared to the same period last year. That’s the world’s second-fastest growth rate. Only China, with an 11.9% expansion, saw stronger growth.

India’s gain was largely the result of a 16.3% increase in manufacturing, as the country continued its faster-than-expected recovery from the global economic slowdown.

India’s strong economic performance is expected to continue: the World Bank recently projected that the country’s economy could grow at an annual rate of 8% to 9% over the next two years.

An easy way to invest in India with less risk

Despite its breathtaking growth, India remains a difficult place for direct world stock market investing. If you directly invest in foreign companies, including Indian stocks, you’ll have to worry about currency exchange rates, foreign stock exchange rules and foreign languages. As well, price information is not readily available, and transaction costs are high.

That’s why we think you’re far better off investing in India and other overseas markets through international exchange-traded funds (ETFs). High-quality international ETFs let you make international investments with greater safety, and without the complications of directly investing in a foreign stock market.

(In a recent issue of our Canadian Wealth Advisor newsletter, we updated our buy/sell/hold advice on iShares S&P India Nifty 50 Index Fund (symbol INDY on Nasdaq), an exchange traded fund that tracks some of the largest, most liquid Indian stocks. See below for further details.)

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Exchange-traded funds mirror the performance of a stock-market index or sub-index. They hold a more-or-less fixed selection of securities that are chosen to represent the holdings that go into the calculation of the index or sub-index. We recommend a number of carefully selected ETFs in Canadian Wealth Advisor.

ETFs trade on stock exchanges, just like stocks. Investors can buy them on margin or sell them short. The best ETFs offer well-diversified, tax-efficient portfolios with exceptionally low management fees. They are also very liquid.

World stock market: This ETF holds some of India’s top stocks

iShares S&P India Nifty 50 Index Fund is an ETF that aims to track the S&P CNX Nifty Index, which represents the 50 largest, most liquid Indian securities on the National Stock Exchange of India.

The fund’s top holdings are Reliance Industries (conglomerate), 11.4%; Infosys Technologies (software), 8.6%; ICICI Bank, 7.0%; Larsen & Toubro Ltd. (conglomerate), 6.4%; Housing Development Finance, 4.8%; ITC Ltd. (conglomerate), 4.5%; State Bank of India, 4.1%; Bharat Heavy Electricals, 2.6%; and Tata Consulting Services (information technology), 2.4%.

The fund’s industry breakdown includes: Banks, 17.8%; Computers: Software, 13.1%; Refineries, 11.9%; Steel and Steel Products, 5.3%; Finance: Housing, 4.8%; Power, 4.6%; Cigarettes, 4.5%; Electrical Equipment, 4.2%; Automobiles, 4.2%; and Telecommunication Services, 3.8%. The ETF has an expense ratio of 0.89%.

You can get our full analysis of the iShares Nifty 50 Index Fund and a number of other ETFs suitable for world stock market investing in Canadian Wealth Advisor. Click here to learn how you can get one month free when you subscribe today.