As investors continue to reap the benefits of growth in emerging markets, ETF provider, Van Eck, recently announced the launch of the Market Vectors India Small-Cap Index ETF (NYSEARCA:SCIF) giving investors yet another way to access the emerging nation.
SCIF seeks to replicate the performance of the Market Vectors India Small-Cap Index which provides exposure to publicly traded companies that are headquartered in India or that generate the majority of their revenues in the country. Additionally, the index utilizes a float-adjusted modified market capitalization weighting methodology to determine holdings.
As for a sector breakdown, the index allocates 26.8% of its assets to industrials, 20.4% to financials, 13.7% to materials, 12.2% to information technology and 11.8% to consumer discretionary. The index has 122 holdings, with IFCI Ltd. and Sintex Industries Ltd. as its top two holdings.
The beauty of SCIF is that it allows investors to invest in smaller companies in India, which tend to have more localized businesses and earnings growth. Going forward, as purchasing power of the Indian consumer increases and the middle class continues to widen, consumer spending will follow enabling smaller companies to benefit.
Another way for investors to play the small-cap market in India is through the EGShares India Small-Cap (NYSEARCA:SCIN), which aims to replicate the price and yield performance of the Indxx India Small Cap Index. The Indxx India Small Cap Index is a freefloat market capitalization weighted stock market index comprised of a representative sample of 75 Indian companies that are domiciled in India, which allocates 12.59% of its assets to commercial banks and 8.67% to IT services.
For those looking to gain access to large-cap Indian stocks like Reliance Industries and Infosys Technologies (NYSE:INFY), one could consider the following:
- WisdomTree India Earnings (NYSEARCA:EPI)
- iPath MSCI India Index ETN (NYSEARCA:INP)
- PowerShares India (NYSEARCA:PIN)
When investing in the aforementioned equities, it is important to consider the inherent risks and volatility that are involved with both small-cap stocks and emerging markets. To help protect against this, the use of an exit strategy which identifies when upward trends are likely to come to an end is important.
Disclosure: No positions