India ETFs Fade On Inflation Uptick (PIN, INDY, EPI)

Christian Magoon: The official inflation number hit market on Thursday in India and it was a 7.55% increase year over year sending India ETFs down slightly. This was a slight pick up from the last monthly year over year number and but wasn’t a huge surprise to the upside. Here’s the chart of the last few months of inflation numbers from tradingeconomics.com.

india inflation

The bad news here is that the number has risen, the good news is that it wasn’t a major spike. This allows the Reserve Bank of India (RBI) some room when it announces its interest rate policy update next week on June 18th. Markets are factoring in an interest rate cut of .25 bps according to a Bloomberg survey. The current interest rate level is 8% in India.

In U.S. midday trading, some of the larger India ETFs are trading downward by around one half of one percent. These ETFs include the largest India ETF, the WisdomTree India Earnings ETF (NYSEARCA:EPI) and the second largest the PowerShares India Portfolio (NYSEARCA:PIN). Below you will see a five day performance snapshot from Yahoo Finance of these ETFs including iShares India ETF (NYSEARCA:INDY).

india fund performance

Investors in India ETFs will now focus on interest rate policy. This should be the most important market moving piece of data in India aside from another surprise move by credit ratings agency S&P.

Externally the big risk for India will be how Sunday’s elections in Greece play out. Should the election point to an end game of Greece leaving the EU, considerable chaos would be likely worldwide. This chaos would push investors into a risk off mode, hurting India in two ways. First it would constrict new investments into India and second it would likely weaken the rupee further as the U.S. Dollar would strengthen. This is turn makes it more probable that S&P will step up and officially downgrade India’s debt to junk status – a triple whammy for a country trying to recover economically.

Clearly the next week will be momentous for India ETF investors, not to mention the rest of the world. India is part of a series of dominoes that could fall by events triggered in Greece this Sunday. Due to that risk, extreme caution is advised for investors in India ETFs.

Written By Christian Magoon From Magoon Capital

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.”

Leave a Reply

Your email address will not be published. Required fields are marked *