Traders seeking opportunities in emerging markets (EM) may want to give India a closer look. India-focused exchange-traded funds (ETFs) saw record-shattering inflows last year, according to a recent Forbes article.
“Net inflows into exchange traded funds (ETFs) focused on Indian stocks shattered records in 2023, clocking in at $8.6 billion last year,” a Reuters article noted. “India’s NSE Nifty Index surged nearly 20% in 2023, handily outperforming the MSCI emerging markets index that saw a 7% rise.”
As China continues to struggle with economic growth following a real estate development crisis that left its economy in shambles a few years ago, India has emerged as a potential investment case. It’s not an overnight success, but one that has been brewing for a number of years, according to market experts.
“There has been a cataclysmic change that has taken place in the last 5-6 years in India,” said Varun Laijawalla, senior portfolio manager for emerging markets for Ninety One, a London-based global investment manager.
It’s not just the anticipation of rate cuts that is fueling a push toward India-focused ETFs. The country is also exhibiting growth in sectors like technology, manufacturing, and real estate, as well as a rise in its middle class.
“Those three changes permeate to where the equity opportunities are,” Laijawalla added.
If inflows continue, then short-term traders looking to capitalize on its run up should look at the Direxion Daily MSCI India Bull 2x ETF (INDL). It seeks daily investment results that are equal to 200% of the performance of the MSCI India Index. That index measures the performance of the large- and midcap segments of India’s equity market. It covers approximately 85% of companies in India’s equity universe.
2 Options for Leveraging Broad EM
A retreating dollar should also benefit broad ETFs. To that end, traders may want to take a blanket approach on EM strength with leverage using ETFs like the Direxion Daily MSCI Emerging Markets Bull 3X Shares (EDC). The fund seeks daily investment results equal to 300% of the inverse performance of the MSCI Emerging Markets Index. That index is designed to represent the performance of large- and midcap securities across emerging markets countries.
As China tries to get its economic house in order, traders can also get exposure to EM without Chinese equities. This is available using the Direxion Daily MSCI Emerging Markets ex China Bull 2X Shares (XXCH), which offers twice the daily performance of the MSCI Emerging Markets ex China Index.
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