India ETF Rally Fueled By Liquidity Hopes (PIN, EPI, INDY, INCO)
Christian Magoon: India fund products started last week negatively but rallied the last few days of the week as it appeared central bankers from several key regions are close to introducing more liquidity into the financial system. Here’s last week’s daily performance graph from illustrating the daily conditions of the markets. India fund products illustrated in the MSNmoney chart below include the iShares S&P India Nifty Fifty Index ETF (NYSEARCA:INDY), the WisdomTree India Earnings Fund (NYSEARCA:EPI) and the PowerShares India Fund (NYSEARCA:PIN).
India fund investors ended the week with a bullish trend.
Early in the week it appeared that the EU crisis was about to flare up again. Past flare ups have taken down India fund valuations in two separate ways. First it has pushed investors towards a risk off posture, thus taking demand away from markets like India that carry greater risk. Secondly, it has weakened the value of the rupee as the U.S. Dollar strengthened on turmoil in Europe. This has hurt India’s GDP and business climate and been reflected in lower market valuations.
As the week developed however, signs and even statements supporting future liquidity moves in Europe began to rally markets around the world, including India. At the same time slower GDP growth reported in the U.S. fanned expectations that the Federal Reserve could act soon to introduce another round of liquidity into the financial system. This sentiment was furthered by reporting from several mainstream U.S. news organizations that the Federal Reserve was seriously considering another “stimulus” should the economy show more signs of slowing.
For the year, all India fund products that are not leveraged have gained. Small cap India funds had been best India funds for most of the year but have now been surpassed by a sector fund. The EG Shares India Consumer ETF (NYSEARCA:INCO) is the best india fund year to date. It is followed by SCIN, a small cap India fund, and INDY from iShares. Here’s the year to date chart ranked by performance from the IndiaETFs.com grid.
India fund performance has been strong this year.
Going forward liquidity moves or disappointments in the EU and U.S. will likely be the primary short term drivers of the direction of India fund products. Perhaps that will give India time to continue to repair the internal economic and governance issues it is facing.
Christian Magoon is Publisher of GoldETFs.biz and IndiaETFs.com. He is also CEO of Magoon Capital, a strategic consultant firm to asset managers. Christian Magoon is an ETF insider, having launched over 40 ETFs in the United States to date. A widely recognized thought leader on finance and market issues, Christian regularly contributes to many financial media outlets. Prior to forming Magoon Capital in 2010, Christian was President of Claymore Securities (now Guggenheim Investments), where he built one of the fastest growing and most innovative ETF businesses in the country, gathering more than $3 billion in AUM in three years. He launched more than 40 ETFs, introducing many “firsts” to the U.S. market, including the first Frontier Markets, Sector Rotation, Solar Energy, Timber, BRIC and suite of China focused ETFs. Christian consistently provides his industry insights and knowledge as a commentator in the U.S. media speaking publicly on macro investment issues and ETF related topics. Follow him on Twitter @ChristianMagoon. In 2008, he was named by Institutional Investor News as one of the five people to watch in the U.S. ETF marketplace. In 2011, Financial Planning magazine dubbed Christian an “ETF Pioneer.”