New Passages to India for ETF Investors

Investing in India is about to get easier.

Investors who want exposure to one of the world's fastest-growing economies have so far been limited to a handful of mutual funds. But that could soon change as both Barclays Global Investors and PowerShares Capital Management are developing exchange-traded products that track Indian stock indices.

The BGI product is called the iPath MSCI India Index ETN and is expected to launch on or around Dec. 20, according to a filing with the Securities and Exchange Commission. The product is structured as an exchange-traded note, or ETN, which is a debtlike security that promises to deliver the same returns as a specific index -- in this case the MSCI India Total Return Index, a market-cap-weighted index made up of roughly 70 Indian securities.

PowerShares, meanwhile, has two India-based exchange-traded funds in the works. The PowerShares India Tiger Portfolio, which is expected to trade under the ticker PGK, will track the Halter India Tiger Index, which includes both ADRs and U.S.-listed companies that derive the majority of their revenue from India. The index is more concentrated than the iPath product, with about 25 securities represented. This ETF has been approved by the SEC, though PowerShares says it probably won't launch until next year.

PowerShares also has filed with the SEC to launch an ETF that would invest exclusively in securities listed on Indian exchanges, although it's not clear when it could come to market.

Indian stocks have been on a tear -- the Bombay Stock Exchange Sensex is up more than 38% year to date. But investors need to be prepared for some jaw-dropping volatility. For example, during the month of May, the index swung from a high of 12,671 to a low of 9,825, a drop of just over 22%.