Many emerging market nations have been hit hard by the taper, though India was arguably one of the most impacted by the reduced bond buying. However, it seems like the South Asian nation is finally beginning to digest the gradual decline in the number of cheap dollars in the market. Two of the most popular Indian equity market benchmarks – Nifty and Sensex – have been hitting new highs every other day.
A slew of positive economic data points—such as strong foreign fund inflows and election fever– are some of the primary factors driving this rally. The Indian rupee, which had hit a record low in August last year, has shown considerable strength against the greenback in recent weeks despite the ongoing cut in Fed’s monetary stimulus program. It is currently trading at an eight-month high on the back of an improving economic picture.
The current optimism is backed by proactive measures taken by the fiscal and monetary authority of India. The country’s RBI Governor has taken a series of steps, which went a long way to boost the nation’s foreign exchange reserves.
According to the latest data, India’s foreign exchange reserves jumped by a massive $5.04 billion to $303.67 billion in the week ending March 28, representing the biggest weekly rise in four months. Moreover, this is the first time after two years that the figure crossed the $300 billion mark.
India’s current account deficit has now fallen to less than 1% of GDP, half from where it was in 2013. Moreover, the current account deficit is expected to come down to $35 billion at the end of fiscal 2013-2014, from a record high of $88 billion registered at the end of fiscal 2012-2013.
Additionally, the country’s GDP growth is also showing an improving trend. For the fiscal year ended 2013-2014, India grew by 4.9%, compared with a decade-low of 4.5 % in the previous fiscal.
Though the country’s continues to remain a high inflation economy, the current 8% inflation is still well below the double digits India had not too long ago. Though the country continues to suffer from high inflation, the current 8% inflation rate is well below the double digits India had not so long ago. Thus the improving fundamentals point towards growing signs of stability in the Indian economy.
Moreover, there is a solid chance that the opposition leader, Narendra Modi, will form a new government and turn things around for Asia’s third largest economy (read: Will India ETFs Election Fever Continue?).
Since the Indian economy is now less fragile than it has been over the past two years and the country’s fundamentals are expected to improve going forward, a look at a top ranked Indian ETF will be a good idea to capture the surge, especially based on our Zacks ETF Ranking system.