Indian ETFs Rally on Election Victory (EPI, INDY, INDA, SCIF, SMIN)

The world’s largest election results are official. The opposition party, Bharatiya Janata, was victorious with Narendra Modi becoming the nations next leader. This election is important on many levels but in the eyes of the world it is encouraging to see democracy reign.

India is the world’s largest democracy and with 1.2 billion people it has one-sixth of the entire population in the world within its borders. As far as the business world is concerned, the new leader has a pro-business agenda and with a large number of talented workers leaving the country, this may shift them back to India.

The potential is there for the Indian economy and if the stock market is a gauge, investors around the world are excited for the country’s future. The major Indian stock indices have been rallying all week and hit a new all-time high on Friday after the announcement.

Indian ETFs

The three largest India ETFs by asset size are the WisdomTree India Earnings ETF EPI,iShares India 50 ETF INDY, and the iShares MSCI India ETF INDA. All three are hitting new multi-year highs to end the week with a flurry.

While all three invest in mainly large-cap Indian stocks, their approach varies as has the returns. Over the last 12 months INDA leads the way with a gain of 19 percent versus a gain of 14 percent for EPI and 11 percent for INDY.

INDA is a basket of 70 mainly 70 large-cap stocks with a heavy emphasis on financials, IT, and energy. INDA is the 50 largest Indian stocks and has a lot less emphasis on the energy sector. EPI uses a fundamental approach to choosing the stocks that go into the portfolio with more emphasis fundamentally sound companies.

There are also ETFs that invest in the small-cap portion of the Indian stock market. The Market Vectors India Small-Cap ETF SCIF is breaking out to a new yearly high, but is only up 9 percent over the last year and is well off its high set in 2010. The iShares MSCI India Small-Cap ETF SMIN was up 16 percent in the last year and is trading at its highest level since its inception in mid-2012.

Investors must put the situation in perspective and realize that many of the ETFs are up nearly 10 percent in the last 10 days and that there could be some profit taking in the coming days. There is no reason to chase the ETFs at this point considering the first initial move is complete. The investor that has a longer-term view should be looking to buy into any pullbacks.