Indian stocks have underperformed their U.S. counterparts by about 5% since global equity markets bottomed toward the end of March amid investors remaining on the sidelines as the South Asian nation enters its eighth week of a strict anti-coronavirus lockdown. Sentiment turned more upbeat Tuesday after Indian Prime Minister Narendra Modi unveiled a $266 billion stimulus package, equivalent to about 10% of the country's gross domestic product (GDP), to help revive the world’s fifth-largest economy.
While Finance Minister Nirmala Sitharaman will outline specific details of the economic package Wednesday, Prime Minister Modi said that broad sections of society would receive support. "This package is for the country's labor, farmers who have worked in every condition and every weather and round the clock for the fellow countrymen, for India's middle class who pays tax honestly and for industries," Modi said in an address to the nation, per India's Financial Express.
As further details of the economic rescue package come to light, those who follow Indian stocks can play heightened volatility through the three India exchange-traded funds (ETFs) discussed below. Let's review the metrics of each fund and turn to the charts to identify key trading levels.
iShares India 50 ETF (INDY)
With assets under management (AUM) of almost $520 million, the iShares India 50 ETF (INDY) tracks the investment results of the Nifty 50 Index – India's key stock benchmark. The non-diversified fund provides exposure to 50 blue-chip Indian companies traded on the National Stock Exchange of India (NSE). Financial stocks feature heavily in the ETF's portfolio, with the sector receiving a 36.35% allocation. While trading costs aren't the cheapest in the segment, they remain competitive for an emerging market fund. INDY charges a 0.94% management fee, issues a 0.75% dividend yield, and has fallen 28.92% year to date (YTD) as of May 13, 2020.
The ETF's share price rose nearly 5% from the lower trendline of a rising wedge pattern in Tuesday's session – a move that may trigger further upside momentum in the coming days. Swing traders who open a long position should aim to book profits at $34, where the fund may find sellers near the lower trendline of a previous trading range and 200-day simple moving average (SMA). Protect capital by exiting if the price breaks down below the wedge pattern.
Invesco India ETF (PIN)
Created in 2008, the Invesco India ETF (PIN) seeks to provide a similar return to the FTSE India Quality and Yield Select Index. The $77.51 million fund invests in Indian companies screened for yield and quality characteristics while capping individual stock positions at 10%. Although the ETF's basket holds about 130 equities, its top 10 allocations carry a cumulative weighting of over 50%, making it somewhat top-heavy. Sporadic trading volumes, along with an average 0.58% spread, make the fund more suited to mid-term strategies rather than scalping day-to-day fluctuations. As of May 13, 2020, PIN has a 0.78% expense ratio and is trading 21.14% lower on the year. However, over the past month, the ETF has clawed back 5.25%.
PIN shares have also tracked higher in a rising wedge, with price threatening to break out above the pattern yesterday after the announcement of the stimulus package. Given the relative strength index (RSI) sits comfortably below overbought levels, the fund has ample room to test major overhead resistance at $17.5. Consider keeping a tight stop-loss order just below $15.50 to guard against a sudden downside reversal.
WisdomTree India Earnings Fund (EPI)
The WisdomTree India Earnings Fund (EPI) aims to track the performance of the WisdomTree India Earnings Index. Charging a 0.85% management fee, the fund provides an alternative take to investing in Indian equities by holding firms selected and weighted according to earnings in the prior fiscal year. More than 2 million shares exchange hands per day on tight penny spreads to make the fund a traders' favorite in the Indian smart-beta space. EPI controls $662.57 million in net assets, yields 0.99%, and has slumped 28.40% YTD as of May 13, 2020.
Tuesday's rally within the rising wedge pattern occurred on the heaviest volume since the March capitulation sell-off, indicating conviction behind the bullish move. In terms of trade management, traders could set a profit target near a closely watched resistance area at $22 while simultaneously placing a stop below the 50-day SMA. The setup offers a favorable risk/reward of nearly 1:3.5, assuming a fill at yesterday's $18.48 closing price.