India: Poised for Growth

08/05/2014 10:00 am EST

Focus: STOCKS

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and ETFU.com

India, one of the most populous nations on Earth, is an interesting country for investors because it holds the promise of significant growth potential, suggests Doug Fabian, editor Weekly ETF Report.

Its unique characteristics include a population that is young compared to developed nations, the presence of some world class universities, and the availability of many employable, English-speaking people.

But the country has not yet managed to overcome regulatory obstacles and other problems that have held it back from achieving higher growth rates in the past.

However, the recent election of a new, pro-business prime minister makes now a good time to consider investing in funds such as the Market Vectors India Small-Cap ETF (SCIF).

The election of conservative Bharatiya Janata Party (BJP) leader Narendra Modi as prime minister sets the stage for this country to grow rapidly.

In fact, some observers anticipate this economic expansion will occur relatively quickly, as it has in some other Asian countries that modernized and adopted business-friendly policies.

SCIF is an ETF that seeks to replicate the results, before fees and expenses, of an index of small-cap companies that either are headquartered in India or generate most of their revenues in the country. If you are risk averse, keep in mind that this country-specific ETF is not diversified.

So far this year, SCIF has gained 53%, with a significant climb occurring after Prime Minister Modi’s election. In addition, not only is SCIF a way to invest in India, which seems poised to prosper, but this particular ETF also focuses on small-cap stocks.

Small-caps have traditionally outperformed the broader stock market, at least here in the United States. Applying this lens to the Indian situation can make investing in Market Vectors India Small-Cap ETF potentially even more appealing.

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