Investing in India?

[Arindam]

Years ago, closed-end funds such as IFN were the only way a US investor could access this important market. These days, there are 18 ETFs that focus on India but still only 9 ADRs, making CEFs or ETFs the only viable way in invest in Indian stocks.

But if one runs correlations on the ETFs, or pulls their schedules of holdings, it’s easy to see that nearly all of them are clones of each other and offer little diversification. To buy one of them is to have bought nearly any other.

Ticker	INDA
INDA	1
INDL	0.99
EPI	0.98
FLIN	0.97
PIN	0.97
INDY	0.96
GIND	0.96
NFTY	0.95
GLIN	0.95
INCO	0.93
INDE	0.88
NDIA	0.87
IOPP	0.87
DGIN	0.86
INDH	0.86
SMIN	0.83
INQQ	0.76
IFN	0.65
IND	0.46

There are two exceptions, the original closed-end fund, IFN, and IND. Both of them seem to be doing their own thing. So, if it were me suggesting which India fund or funds might be worth adding to your watchlist for country funds, I’d suggest picking one of the three most liquid of the clones, INDA, FLIN, EPI, and also track IFN and IND. That trio should give good coverage of the market.

However, right now isn’t the time to be doing much buying. For reasons I don’t understand, the Indian market isn’t doing well. So now is the time to be watching, not buying.

[Arindam]

Not the most auspicious of charts, right? But I’m in. So, why did I buy today on a down day for my home market, the good, old USA? Maybe for that exact reason. If India was trading counter-trend, then maybe, just maybe, that market was beginning to recover from its slump.

I also wrote two other orders, one for IFN which Firstrade rejected saying, “Opening positions not allowed on illiquid stocks”. So I executed through TOS. And I wrote an order for FLIN. I’m happy to report that, mere minutes later, I’m ITM on all three, which is A Good Omen.

As for the chart above, a couple of things are going on. The first panel benchmarks the ticker being charted in the mid panel against a proxy for the US market. I used an equal-weight version of the SP500 index, RSP, rather than the more commonly used cap-weighted version, SPY, because just 4 to 7 stocks are responsible for 25% of that index’s returns, meaning, to buy the cap-weighted version is to make a very focused bet on the Mag Seven, and if that’s what one wants to do, then why not make that bet directly or on a very techie index like the NASDAQ 100?

For now, RSP is a good-enough benchmark by which to compare how any country fund is doing compared to my home market. EUSA could also have been used, or the Russell 1000. I just haven’t looked into this deeply yet.

The mid panel is self-explanatory. The “clouds” suggest what the short-term trends are, as does the indicator’s wiggles and waggles in the lower panel. As a would-be investor in the Indian stock market, one wants to be aligned with the trends, not against them. But if one waits until a change of trend is obvious, then ‘information risk’ has been reduced, but ‘price risk’ has been increased. So I’m willing to be a bit too early rather than a whole lot too late. In any case, some positions are on. So now I wait.