NEW YORK ( TheStreet) -- India's Nifty Index and small-cap index hit new 52-week highs in early trading hours Tuesday, as foreign funds continued to drive the markets. During the past one month, Nifty has rallied 12.4%, and the small-cap index has added 5.3%. Small-cap stocks continue to present an underlying buying prospect, with potential for investors to clock further gains. Two ETFs -- Emerging Global Shares Index Small Cap ETF ( SCIN) and Market Vectors India Small-Cap ETF ( SCIF) -- have been launched recently providing an investing opportunity. A recent Morgan Stanley report says India, which currently has the second-fastest GDP growth rate in the world, is likely to reach a growth rate of 9.5% between 2011 and 2015 and overtake China. The latest addition to India's ETF quiver is the Emerging Global Shares Index Small Cap ETF, which was launched on July 7. SCIN tracks the Indxx India Small Cap Index, a free float market capitalization weighted stock market index comprising of 75 Indian companies with market caps ranging between $100 million and $2 billion. SCIN is currently trading at an all-time high of 24.19. With other Indian ETFs like iPath MSCI India Index ETN ( INP), Powershares India ( PIN), and iShares S&P India Nifty 50 Index ( INDY) focusing on large-cap stocks, SCIN provides exposure to high-growth small-cap Indian stocks. The ETF believes that with lower bond returns and widespread uncertainty in many sectors of the U.S. economy, small-caps in emerging markets could continue to outperform developed markets. Posting gains of 7.14% in its first two months, SCIN has an expense ratio of 0.85%, slightly higher than other ETFs. Commercial banks, IT services, and software account for 12.59%, 8.67%, and 7.78%, respectively of the portfolio. Among the ETF's top 10 holdings, Patni Computers ( PTI) has the highest index weighting of 3.39%. Tata Communications ( TCL) is among the top 10 as well with a 1.91% share. A senior analyst at ETF Database said the "SCIN is the one ETF I wouldn't want my portfolio to be missing. In addition to the tremendous growth potential, I'm convinced that this ETF is much more of a sure thing than most investors realize." Industry analysts believe India has the capacity to decouple itself from developed economies, as it has the potential to grow internally. On Aug. 25, Van Eck Associates Corporation launched another small-cap ETF Market Vectors India Small-Cap ETF, which is seeking to replicate the Market Vectors India Small-Cap Index. This is an adjusted index providing investors the means to track the overall performance of publicly traded small-cap companies, which are either domiciled/listed on an Indian exchange, or generate at least half their revenues in India.
Industrials, Financials, and Materials are the top three accounting for 26.8%, 20.4%, and 13.7%, respectively in the SCIF sector breakdown. The index touched its all-time high of 22.31 on October 1. The trigger for Market Vector to launch SCIF is that India's domestic demand drives its economy. The 120 small cap Indian companies, which form a part of the ETF, are those which would be serving the burgeoning middle class. India's favorable demographics--almost 50% of the population is under the age of 25 -- translate into a strong pipeline of human capital expected to lead consumption. According to a McKinsey report, India's middle-class, a major trigger for economic growth, is likely to constitute more than 40% of the total population by 2025 compared to about 5% in 2005.