India, Asia’s third-largest economy, is one of the best-performing emerging markets this year, a theme that is being reflected in a batch of US-listed India exchange traded funds. For example, the iShares MSCI India ETF (BATS: INDA), PowerShares India Portfolio (NYSEArca: PIN) and the WisdomTree India Earnings ETF (NYSE: EPI) have all posted double-digit year-to-date gains.
Those ETFs are among the largest and oldest India ETFs trading in the U.S. and are mostly focused on large-cap Indian equities. New Delhi projects India’s economy could expand between 6.75% and 7.5% in 2017-18 as the government shifts tactics on its economy.
India’s market suffered a blow at the end of 2016 after Prime Minister Narendra Modi yanked about 86% of all cash from the economy to fight so-called black money to fight back against the huge shadow economy. While the economy may experience a short-term setback from the move, the results of demonetization could usher in long-term benefits to the economy.
Franklin Templeton’s Mark Mobius noted in an interview with CNBC that “India’s economy is growing at a faster clip than China’s, and he sees tax reform implemented under Prime Minister Narendra Modi as a positive for the market. And as the market sees more state-owned company shares flowing into the market, Mobius said this is a sign that “more reform” is coming.”
As Mobius points out, mid- and small-cap Indian stocks are performing exceptionally well this year. India small-cap ETFs, including Market Vectors India Small-Cap Index ETF (NYSEArca: SCIF), EGShares India Small Cap ETF (NYSEArca: SCIN) and iShares MSCI India Small-Cap ETF (NYSEArca: SMIN) are among this year’s best-performing non-leveraged ETFs of any type.
SCIN tries to reflect the performance of the Indxx India Small Cap Index, which is comprised of a maximum 75 companies in the small-cap segment in India. SCIF tracks the MVIS India Small-Cap Index of small-cap companies in India. The fund has a broader 158 components. SMIN follws the MSCI India Small-Cap Index and is the most diversified with 256 components.
“India’s Bombay Sensex index has gained 10 percent year to date after seeing a rocky end to 2016 following Modi’s decision to remove large banknotes from circulation in order to fight counterfeit currency issues,” according to CNBC.
More aggressive investors who are confident about India may even look to a leveraged bullish play on Indian markets. The Direxion Daily India Bull 3X Shares (NYSEArca: INDL), which takes the 3x or 300% daily performance of Indian stocks.
For more information on Indian markets, visit our India category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.