India ETFs Surge On Interest Rate Cut (EPI, PIN, SCIF)
Christian Magoon: The Reserve Bank of India has announced a 25bps cut in interest rates today spurring India ETFs forward. This was the first time India’s central bank cut interest rates in nine months and is a result of a rate of inflation that is decreasing. Large cap focused India ETFs including the WisdomTree India Earnings ETF (NYSEARCA:EPI) and the PowerShares India ETF (NYSEARCA:PIN) gained more than half a percent on the news.
India’s interest rates have been relatively high compared to many developing countries due to inflation concerns. Today’s cut of 25bps leaves the interest rate at 7.75% – still high but going in a more favorable direction for investors. Here’s a chart from Google Finance showing Tuesday’s market performance of the leading India large cap ETFs – EPI and PIN and the leading India small cap ETF (NYSEARCA:SCIF).
India ETFs gained on news of the interest rate cut.
Although off to a good start in the beginning of 2013, India ETF performance has tailed off recently. While the interest rate cut was not unexpected, it was positive news for investors searching for the easing of rates to stimulate business and consumer spending. Here’s the year to date performance of PIN, EPI and SCIF. Notice the tailing off of performance that has occurred of late.
Large cap India ETFs are in positive territory for 2013.
Going forward India will need to see more interest rate reductions to stimulate an economy that is fairly weak. The Reserve Bank of India however continues to be challenged to balance the need for access to cheaper capital with the threat of stoking rampant inflation. Investors should continue to pay attention to the Indian market as it has a substantial mix of opportunity and risk.
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.”