Christian Magoon: India ETF products began the week on a slump after markets were disappointed by the lackluster efforts put forth on Monday by the Indian government to bolster the falling rupee and economy. On Saturday the Indian Finance Minister enticed investors by commenting that steps to stop the slide of the rupee would be announced on Monday. This excited markets but were predictably disappointed by the extent and creativity in the measures announced. Hence, India ETF funds like the WisdomTree India Earnings Fund (NYSEARCA:EPI) and the PowerShares India Portfolio (NYSEARCA:PIN) were off .59% and 1.05% respectively. This decline extended last week’s poor results across the board for non leveraged India ETF funds. Here’s the IndiaETFs.com performance grid snapshot showing last weeks dismal market.
Predictably, three of the four best performing non leveraged India ETFs were small cap focused. Year to date the India Small Cap Index ETF (NYSEARCA:SCIF) continues to lead in performance followed by the EG Shares India ETF (NYSEARCA:SCIN). Although only launched in the first quarter of 2012, the iShares India Small Cap ETF (BATS:SMIN) is also showing promise. Small caps have been outperforming all year causing many to wonder if there is a bigger rally ahead for India despite its four month decline. Here’s the year to date performance grid snapshot from IndiaETFs.com. Note that most are still in positive territory this year despite the rash of internal and external obstacles to this market.
India ETF investors have been through a series of disappointments of late. First credit agency S&P released a statement indicating the India is very close to losing its investment grade status. This statement was not scheduled and roiled markets to the tune of a 3% decline. About a week later, India ETF investors were stunned and seriously disappointed when the Reserve Bank of India (RBI) did not cut interest rates. This came shortly after a better than expected inflation number and fellow BRIC country China cutting rates by 25bps. The markets had priced in a 25bps cut to rates and when it did not materialize, markets fell again.
Now the meager reaction to the disappointment on Monday seems to show that investors are used to being underwhelmed. That apathy may be a sign that India is slowly losing its credibility with investors. For India ETF shareholders, that would be a bad sign.
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.”