For traders with a global perspective, India has proven to be one of the brightest spots so far in 2014. By examining the chart of the PowerShares India Portfolio ETF (PIN) shown below, you’ll find that it has risen by 20.83% so far this year and that it is trading near the upper end of its 52-week range. From a technical perspective, it is interesting to see how the recent pullback has sent the price toward the support of its 50-day moving average. Many traders will use this level when determining where to set stop-loss orders also taking into account a reverse in the long-term uptrend will not occur until the price closes below the 200-day moving average (red line). Given the strong uptrend, now could be the ideal time to increase exposure to this dynamic region. (For more, check out An Introduction To The Indian Stock Market.)

PIN screenshot

Investing In American Depositary Receipts

As many of you likely know, there are a host of challenges when a trader forms an interest in buying shares in companies from foreign countries. In many cases, it is impossible to gain exposure to the biggest names unless the trader has filled out proper documentation or has an account in the given country. (For more, check out Investing Beyond Your Borders) Luckily, the invention of exchange-traded funds and American Depositary Receipts has changed the game for the average trader. For those who don’t know, an exchange-traded fund is essentially a basket of stocks similar to a mutual fund. An ETF trades on the major U.S. exchanges like a regular stock. The details for picking the components and how the fund is structured are left to a manager. American Depositary Receipts, also known as ADRs, are becoming more popular and are essentially securities that represent shares of non-U.S. companies that trade in the U.S. financial markets.

For those who don’t follow the PowerShares India Portfolio ETF (PIN), you’ll be interested to learn that the fund holds 50 positions in securities that comprise ADRs and foreign shares of 50 of the largest Indian stocks listed on the two major Indian exchanges. The ETF carries a 0.82% total expense ratio and consists of companies in sectors ranging from energy, information technology, health services, financial services, consumer products, heavy industry and more. It may prove beneficial for traders to examine the top five holdings of PIN shown below in order to create a watch list of potential investment candidates. (For more, see Ways To Play India.)

Company

Weight (%)

Reliance Industries Ltd.

9.42

Infosys Ltd. (INFY)

8.96

Oil & Natural Gas Corp.

8.87

HDFC Bank Ltd. (HDB)

5.89

Tata Consultancy Services Ltd.

4.62

A Closer Look At The Top Holdings

Most of the holdings shown in the table above trade on Indian stock exchanges and can be difficult for the average U.S. trader to invest in. However, the strength and quality of the names in the table is one of the reasons why exchange-traded funds such as PIN are becoming the go-to tool of choice for investing in foreign countries such as India. If a trader wants to place an even more specific bet on Indian stocks, then ADRs such as INFY and HDFC could be worth a closer look.

As you can see from the chart of Infosys shown below, the price has recently moved above a key level of support/resistance (blue dotted line). This bullish move suggests that the momentum will continue to be in the upward direction and that a move similar to the previous swing high of $62.37 is likely. (For more on this topic, check out Invest In India Through ETFs.)

INFY screen shot

The Bottom Line

Investing directly in foreign companies can be quite difficult. Luckily, the invention of exchange-traded funds and American Depositary Receipts has changed the game for the average investor. As mentioned above, it is a wise idea to examine the key components of any exchange-traded funds for ideas, and in some cases the ETF itself is the best way to gain exposure to the underlying components. Given the robust economy, economic scale and strong performance so far this year, India could be an ideal place for investors looking on where to start putting their money. Based on the analysis above, the PowerShares India Portfolio ETF (PIN) could prove to be an interesting choice.

Related Articles
  1. Chart Advisor

    Gold Struggles to Climb Higher and May Fall Soon

    Traders will be watching the price of gold over the coming weeks. We'll take a look at how a couple major moving averages are suggesting that the next move could be lower.
  2. Economics

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
  3. Mutual Funds & ETFs

    ETF Analysis: United States Brent Oil Fund

    Learn more about the United States Brent Oil exchange-traded fund, the characteristics of the fund and the suitability and recommendations of it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Ultra Bloomberg Crude Oil

    Find out more about the ProShares Ultra Bloomberg Crude Oil ETF, the characteristics of UCO and the suitability and recommendations of UCO for investors.
  5. Active Trading Fundamentals

    The Top 5 Impact Investing Firms

    Learn what impact investing is and obtain information on some of the top impact investing firms ranked by total assets under management.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Hong Kong

    Learn about the iShares MSCI Hong Kong fund, which invests in various equities of companies listed on the Hong Kong Stock Exchange.
  7. Mutual Funds & ETFs

    ETF Analysis: Vanguard Small-Cap Growth

    Take a close look at the Vanguard Small-Cap Growth ETF, which focuses on domestic small-cap equities with a fundamental growth strategy.
  8. Mutual Funds & ETFs

    ETF Analysis: First Trust Dorsey Wright Focus 5

    Take a closer look at the First Trust Dorsey Wright Focus 5 ETF, a unique and innovative fund of funds based on momentum and relative strength.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares National AMT-Free Muni Bond

    Take an in-depth look at the iShares National AMT-Free Municipal Bond ETF, a highly diverse and very popular muni bond fund.
  10. Mutual Funds & ETFs

    Top 3 Switzerland ETFs

    Explore detailed analysis and information of the top three Swiss exchange-traded funds that offer exposure to the Swiss equities market.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Brazil, Russia, India And China ...

    An acronym for the economies of Brazil, Russia, India and China ...
  3. Caribbean Community and Common ...

    The Caribbean Community and Common Market (CARICOM) is a common ...
  4. Caribbean Development Bank (CDB)

    The Caribbean Development Bank (CDB) is a multilateral financial ...
  5. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  6. Welfare Capitalism

    Definition of welfare capitalism.
RELATED FAQS
  1. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  2. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  3. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>
  4. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  5. How are American Depository Receipts (ADRs) exchanged?

    American depositary receipts (ADRs) are bought and sold on regular U.S. stock exchanges, either in the over-the-counter market ... Read Full Answer >>
  6. What are the differences between global depositary receipts (GDRs) and American depositary ...

    A global depositary receipt (GDR) is a bank certificate issued in multiple countries for shares in a foreign company. The ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!