A leading Indian exchange-traded fund that’s traded in the U.S., BlackRock’s iShares MSCI India ETF (US:INDA), is attracting a high number of short sellers and has a bearish put-call ratio, according to data compiled by Fintel. However, the Indian economy grew rapidly in the first quarter and has multiple other positive catalysts.
Given these points, the ETF could potentially be poised to undergo a short squeeze in the medium term.
Assets invested in global exchange-traded funds topped $10.3 trillion, the highest since the end of 2021, consultancy ETFGI recently reported. On a global basis, ETFs have seen 48 consecutive months of net inflows, The Financial Times reported this week, citing ETFGI’s data.
INDA, with $4.94 billion in net assets, tracks the MSCI India index. It currently holds about 115 stocks in its market-cap weighted portfolio. Financial stocks make up the biggest share, at 26.9% allocation, followed by technology (12.6%) and energy materials (11.7%). According to VettaFi, the ETF has seen $12.89 million in net flows into the fund in the last three months.
The exchange-traded fund is up 2.8% in 2023. Sponsor iShares charges an expense ratio of 0.64%. Peer funds include WisdomTree India Earnings ETF (US:EPI), which carries an expense ratio of 0.84%, and the First Trust India NIFTY 50 Equal Weight ETF (US:NFTY), with an expense ratio of 0.80%.
Many Short Sellers and a Bearish Put-Call Ratio
On June 20, 85.47% of the trading volume of INDA stock outside of the major exchanges was carried out by short sellers, Fintel’s dashboard shows. That was up from 72.76% on June 16, but down from 88.3% on June 15. On June 14, however, the ratio was only 63.35%.
On the other hand, short sellers only had to pay an annual rate of 0.25% to short INDA on June 21.
The ETF had a bearish put-call ratio of 1.78 on June 20, although that was much less negative than the ratios of 5.11, 5.14, and 5.12 on June 16, June 15, and June 14, respectively.
Indian Economy on a Tear
Now the fifth-largest economy in the world, India’s economy expanded at a 6.1% annual rate in the first quarter, as outlays by businesses and the government surged, although the metrics measuring consumer spending increases were unimpressive.
Nonetheless, India’s economy grew more quickly than most other developing economies, surpassing the United Kingdom in the latest tally. And the Asian country’s government predicts that the economy will enjoy 6.5% growth during this fiscal year, which kicked off on April 1.
Also noteworthy is that India’s tech sector is becoming vibrant, as the nation now has 100,000 start-ups, 30 of which are worth more than $1 billion. Further, nearly 700 million Indians have internet access.
Meanwhile, the country has invested a great deal in its transportation systems in recent years. Among the infrastructure that has been built up during that time are the country’s railways, ports, and roads.
Finally, India looks like one of the nations that’s well-positioned to gain from China’s pain. Indeed, with many Western companies looking to diversify their production bases away from China ahead of a possible armed conflict between the latter country and Taiwan, Apple’s (US:AAPL) partner, Foxconn, recently decided to build a new $700 million factory in Bengaluru, India, greatly boosting the number of iPhones that it makes in the country.
Given Apple’s status as one of the world’s largest, most prominent, and most successful companies, there’s a good chance that other firms will make similar moves in the medium term and the long term.
While INDA stock ranks a low 26.18 score on Fintel’s Fund Sentiment dashboard, a few major institutional investors signficantly increased their stakes in the ETF last quarter.
Nomura Asset Management bought 12,000 shares of the name, while Legal & General Group, already among the top 25 institutional owners, bought 75,000 shares. Baird Financial Group purchased slightly over 9,000 shares.
This article originally appeared on Fintel
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