Fundamentals: India has good long-term prospects. The closed end fund India Fund Inc. (IFN) seems to have halved from it’s May top, thus the 6% premium is attractive. The underlying holdings of IFN are well diversified over construction, technology, financials & oils.
Sentiment: The 6% premium can be interpreted as a measure of U.S. retail investor enthusiasm for the Indian market. Based on that, holding a big chunk of this fund can be quite risky. If the Indian market just stays more or less stagnant and investor enthusiasm wanes you could possibly see a 10-15% drop. However, that has very little to do with the earnings or performance of the underlying companies in the fund.
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Yaser Anwar is a guest author at ETFtrends & the editor of Investment Ideas by Yaser Anwar blog. The author of this article is not a registered financial advisor & does not give investment advice. This article does not comprise any solicitation to buy or sell securities, ETFs or other investment vehicles.