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Summary Investing in the Market Vectors India Small-Cap Index ETF is one of the most strategic means for investors to profit from India’s economic growth. The earnings of the fund’s top 10 holdings have increased substantially since 2012, yet this has not been reflected in the fund’s price. India’s macroeconomic outlook is extremely impressive, with a projected annual GDP growth of 7.5% for 2016. Consumption in India is rising substantially. This trend is relevant for the entire population, regardless of socioeconomic status. India’s economy is an excellent option for investment in Asia. Having spent a year there collectively studying and volunteering, I was able to witness firsthand the substantial economic growth in the country. India has the world’s largest youth population , a favorable demographic position given China’s again population. This strength in numbers is also edified by population that I would characterize as highly ambitious, and a key driver of the country’s future economic growth. I have determined that investing in the Market Vectors India Small-Cap Index ETF (NYSEARCA: SCIF ) is one of the most strategic means for investors to profit from India’s economic growth. This outlook stems from the collective benefits of low valuation and excellent financial performance. India is an economic gold mine, and the only challenge I foresee is discerning between a good ETF and an excellent ETF. SCIF data by YCharts. The majority of the fund’s top ten holdings have consistently increase their earnings since 2012, yet this has not been reflected in the fund’s price. Moreover, recent financial performance of the fund’s top holdings clearly displays that a reconciliation of the fund’s price is befitting. This fund is certainly undervalued. Valuation: Small-Cap Approach is Most Strategic The fund’s current valuation is extremely low when compared to the iShares MSCI India ETF (BATS: INDA ), thus verifying that the small cap approach is a more strategic means to gain exposure to India. This is verified not only by its valuation, but also an examination of the earnings of the fund’s holdings. The fund’s price has increased substantially since 2014, yet the valuation is still incredibly low. Top 10 Holdings Some highlights of the fund’s holdings, affirming the prestige and upside potential of this fund include the following: Consistent Financial Performance : 7 out of 10 of the fund’s top holdings were able to consistently increase in net income and net revenue since 2012. High Growth : The average increase in net revenue and net income, excluding NCC Ltd., was 33.3% and 44.6% respectively. Low Valuation : The average P/E for the fund’s top holdings, based on the valuation of the India listings, is 25. This displays that the fund’s has upside potential based on the reconciliation of its P/E. The higher valuation of other ETFs in India further verifies this. India’s Macroeconomic Outlook: A Bullish Sentiment is Befitting Annual GDP Growth : India’s annual GDP growth recently expanded to 7% during the 2nd quarter of 2015, and is projected to increase to 7.5% by the 2nd quarter of 2016. Marketing to the Bottom of the Pyramid : During my time in India, I lived in rural areas where houses did not have running water, and only had electricity for two hours every day. Consumption is still king in India, as these same households also had internet, cell phones, and TVs. This demographic, coupled with the affluent population of India, proves that the trends of consumption are relevant to the entire population. Consumption Growth : Consumption has clearly been on the rise in India since 2012, and Trading Economics has made the following projections regarding consumption growth during the next twelve months. Consumer Spending will increase by 6.7% Disposable personal income will increase by 20.2% Inflation will remain near 3.8% (click to enlarge) Source: Trading Economics . Small-Cap Approach : This approach seems to be the most strategic means to gain exposure to India’s economic growth, as I have witnessed the strength of SMEs in India, and particularly the benefits of microfinance. The financials and valuation previously presented further display the advantage of this approach. Exports : Exports are projected to increase by 12.4% during the next twelve months. Conclusion I recommend the Market Vectors India Small-Cap Index ETF as a strategic means for investors to gain exposure to India’s economic growth. I will be focusing on the EGShares India Small-Cap ETF (NYSEARCA: SCIN ) in another article, to determine the relative effectiveness of this fund as an appropriate vehicle to gain exposure to India. Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SCIF over the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Scalper1 News
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