One of the primary sources of strength for diversified emerging markets exchange traded funds this year is India, Asia's third-largest economy. With the MSCI Emerging Markets Index approach 2017 gains of 30 percent, some well-known India ETFs are keeping pace while others are topping the emerging markets benchmark.
Risk-tolerant, sophisticated traders can amplify their gains in Indian stocks on a short-term basis with the Direxion Daily MSCI India Bull 3X Shares (NYSE: INDL), the lone leveraged India ETF trading in the U.S. INDL attempts to deliver triple the daily returns of the MSCI India Index, one of the most widely followed gauges of Indian stocks.
The MSCI India Index covers approximately 85 percent of companies in the Indian equity securities market, according to Direxion. Top holdings include Housing Development Finance Co (NSE: HDFC) (9.08 percent), Reliance Industries Limited (NSE:RELIANCE) (6.66 percent) and Infosys Ltd ADR (NYSE: INFY) (6.5 percent).
Proceed With Caution
On a historical basis, India is one of the most volatile emerging markets. Several well-known US-listed India ETFs sport standard deviations that are well above equivalent China funds, putting these ETFs more in line with their Brazil and Russia counterparts.
Volatility cuts both ways with leveraged ETFs. While volatility can be advantageous for traders, that same volatility can also reverse course quickly, causing pain for those who hold an ETF like INDL for weeks or months on end. Like any leveraged ETF, INDL is a short-term trade, not a long-term investment.
A rising rupee has also been a near-term headwind for India's markets.
“India's stronger currency has become a threat for its growth aspirations, piling pressure on the central bank to aggressively intervene in the foreign exchange market even at the risk of incurring the wrath of the United States,” reports Reuters.
Traders Are Interested
While the strong rupee is an issue to consider, some traders see promise in Indian stocks, as evidenced by recent data that shows active traders are embracing INDL.
For the 30-day period ended Sept. 1st, INDL averaged daily inflows of nearly $155,000, according to issuer data. That was good for the best total among Direxion's leveraged bullish single-country international funds during that period.
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