NEW YORK (TheStreet) -- The Emerging Global Shares INDXX India Small Cap Index Fund (SCIN) is the first small-cap exchange traded fund that focuses on India.

ETF providers including

Market Vectors



have already provided smaller-cap exposure to China and Brazil, which make up half of the so-called BRIC countries -- Brazil, Russia, India and China. It would be reasonable to think a Russian small-cap fund may be coming soon.

The underlying index for India Small Cap has 75 holdings ranging in size from $100 million to $2 billion, with a median market cap of $473 million. Two technology industries (IT services and software) comprise 16% of the ETF, followed by banks at 12%.

Part of the idea behind exposure to small caps is to capture the "story on the ground," which is often obscured in the mega-cap funds. As such, the small-cap fund allocates 19% to consumer stocks. The position in banks captures the story on the ground in terms of financing startup businesses, which will be a big part of India's future development.

India Small Cap doesn't take significant single-stock risk, with the largest holding,

Patni Computer Systems

, having only a 3.4% weighting. Most of the names will be unfamiliar except for the occasional Indian subsidiary of an American company such as

Dish TV

(DISH) - Get Report

or the smaller subsidiary of a large Indian conglomerate such as

Tata Communications



There is a presentation about investing in Indian small-cap stocks on the EG Shares website with all sorts of statistics about the attractiveness of the country and of this segment of the market related to growth, demographics, education and relatively low debt. It's a useful read for anyone interested in the country.

While the numbers are compelling, the big picture is easy to understand. A big driver for many emerging markets has been the modernization of society and an ascending middle class. Specific to India is outstanding education, resulting in many people taking outsourced professional jobs making $10,000 to $20,000 a year, which, while low by American standards, is game-changing in India. When one considers that there are more than 1 billion people and the average age is around 25 years old, the India theme has many years to play out.

Gross domestic product growth in India is forecast to be 9.4% in 2010, according to the International Monetary Fund. China's growth has been very high for years, and we see that country grappling with a possible housing bubble, overcapacity in building, over-indebtedness for various local government entities and an overall short-term disbelief in equity prices. The

Shanghai Composite

is badly trailing the

S&P 500

this year and over the past 12 months. The point here is that, as the story ebbs and flows in India, so, too, will stock prices.

India's benchmark

Sensex Index

has outperformed the S&P 500 in 2010 and from a year ago. And India's small-cap index exceeds the Sensex's returns, with gains of 2.1% and 37%, respectively.

At any rate, I believe long-term success in India for U.S.-based investors will require the willingness to take a more tactical approach than simply buying and holding.

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At the time of publication, Roger Nusbaum had no positions in the securites mentioned.

Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback;

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