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Summary

  • India is the world’s largest democracy, and with 1.2 billion people, it has one-sixth of the entire population of the world within its borders.
  • The major Indian stock indices had been rallying all last week, and hit a new all-time high on Friday after the announcement.
  • INDA is a basket of 70 mainly large-cap stocks with a heavy emphasis on financials, IT and energy.

By Matthew McCall

The world's largest election results are official. The opposition party, Bharatiya Janata Party, was victorious, with Narendra Modi becoming the nation's 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 of 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 had been rallying all last week, and hit a new all-time high on Friday after the announcement.

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Indian ETFs

The three largest India ETFs by asset size are the WisdomTree India Earnings ETF (NYSEARCA:EPI), iShares S&P India Nifty Fifty Index ETF (NASDAQ:INDY), and the iShares MSCI India Index ETF (BATS:INDA). All three were 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 have the returns. Over the last 12 months, INDA has led 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 large-cap stocks with a heavy emphasis on financials, IT and energy. INDY is composed of 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 (NYSEARCA:SCIF) is breaking out to a new yearly high, but is only up nine percent over the last year and is well off its high set in 2010. The iShares MSCI India Small Cap ETF (BATS: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 initial move is complete. The investor that has a longer-term view should be looking to buy into any pullbacks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Source: Indian ETFs Rally On Election Victory