As global vaccination takes place, a turnaround in India could be in store for the rest of 2021. For traders, this presents an opportunity to lever up on exposure to India via the Direxion Daily MSCI India Bull 3x ETF (INDL).
Per a recent Wall Street Journal report, “India’s economy took a pounding from the Covid-19 pandemic. But could the impact of vaccines—combined with the country’s underlying drivers of growth—boost Indian-focused exchange-traded funds in 2021?”
“India has been hard hit by the pandemic, with more than 10 million cases, the report added. “Its economy suffered in 2020; in a January 2021 note, IHS Markit estimated that gross domestic product in the fiscal year 2020-21, which ends March 31, would contract by 8.9% compared with the previous year.”
INDL provides 2x daily long leverage to the Indus India Index, making it a powerful tool for investors with a bullish short-term outlook for Indian equities. Investors should note that INDL’s leverage resets on a daily basis, which results in compounding of returns when held for multiple periods.
The fund can be a powerful tool for sophisticated investors, but should be avoided by those with a low risk tolerance or a buy-and-hold strategy. The fund is up over 40% the last three months.
On October 30, 2020, the 50-day moving average moved up past the 200-day moving average to mark the ‘golden cross’. Since then, INDL has been on an uptrend toward its pre-pandemic high of $70.57 on February 12, 2020.
INDL’s current price is still 30% down from a pre-pandemic price of around $70, but it does have momentum on its side. The relative strength index (RSI) is heading towards overbought levels at 63.24. The stochastic relative strength index (StochRSI) is already there at 0.829.
Large Caps Fueling The Rally
Look for large caps in big tech to continue fueling the rally in Indian equities. Per the WSJ report, “India’s recovery rally was led by high-quality, large-cap companies, particularly those in technology, energy and health care, says Rene Reyna, head thematic and special product strategist at Invesco ETFs & Indexed Strategies.”
‘A successful vaccine rollout may bolster business and consumer sentiment, which should be positive for Indian equities,” adds Reyna.
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