India Emerges from the Pack

I often review relative performance charts of various comparable securities.  It gives a nice eyeball view of how things are moving and what is outpeforming/underperforming.  We can often find paired/hedged option trades through this method.

Taking a look at the 2010 performance chart of the major country ETFs, a clear trend emerged in September:  the outperformance of India (PIN).

2010 Country ETF Performance Chart

So you can see India clearly separated from the pack this month.  While other indices have made nice moves this month, including Australia (EWA), they were coming back from lesser levels.  India was among the top groups for year-to-date performance heading into this month and has greatly grown its lead.

Here's the top holdings of PIN as of the most recent data:

It's fairly well-diversified in terms of sectors, but around 30% of the ETF is locked up in 3 stocks, so those definitely have a significant impact on its performance.

As far as trading opportunities, investors may think this trend will continue and would look to get long India-related stocks, funds and ETFs.  Traders could also take a different perspective and look for China or another country such as Brazil to make up the gap in performance relative to India.  A method to play such a paired type trade through option trading or ETFs would be to go long one country and short another one (such as India).