India hot funds ETFs

Narendra Modi's pro-business platform is firing up investors around the world.

The new Indian prime minister received a rock star welcome in New York City last month after launching a "Make in India" campaign aimed at convincing companies from all over the world to make their products in India.

Modi has watched his country's stock market soar ever since he became the favorite to take office. Boosted by the best quarterly growth in more than two years, the Mumbai Sensex is up 26% so far this year, outpacing most major economies.

Related: India's PM to Corporate America: Come to India

That helps explain why after coffee funds, ones that track Indian equities are the highest performers so far this year.

The Matthews India Investor (MINDX) mutual fund, which invests 80% of its assets in Indian stocks, has soared 50% this year. It's easily the best performing mutual fund in 2014, according to Morningstar. In fact, the top five mutual funds of the year all track the performance of India.

India's also been hot on the ETF front. The iShares MSCI India Small-Cap Index (SMIN), Market Vectors India Small-Cap ETF (SCIF) and the EGShares India Small Cap ETF (SCIN) are all up at least 30% in 2014.

It's worth remembering that because these ETFs track smaller stocks, they are subject to higher levels of risk -- and reward. If Modi's reform plans hit a brick wall or geopolitical concerns emerge, they could take a tumble.

First published October 3, 2014: 8:19 AM ET

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