Christian Magoon: India ETFs bounced back on Tuesday after experiencing a large sell off on Monday. Ratings agency S&P made a surprise statement on Mondayindicating that India was very close to losing its investment grade rating. This snapped a five day winning streak for India ETFs, sending them down by around 3% on average. Incredibly Tuesday saw a bounce back of around 3% on average with the two largest India ETFs, EPI and PIN, gaining 3.1% and 3.6% respectively. Here’s the chart of Tuesday’s performance across the landscape of India ETFs.
INTERNAL NUMBER BOOSTS INDIA ETFS
Why the bounce back? The Indian government announced the latest industrial production number on Tuesday and the number was weak but better than what the markets had braced for. India’s industrial production rose just .1% from the previous April, showing a flatlining of growth in India. This seemed to encourage markets as the number was far better than the previous month but was still troubling enough to put more pressure on the Reserve Bank of India to lower interest rates. A rate cut of .25% is expected on June 18th from the RBI currently. Here’s the recent chart of industrial production numbers from NDTV.
Outside of Monday’s S&P shocker, India ETFs have been on a roll over the last week. A combination of expected interest rate cuts, lower oil prices and government plans announced to launch new infrastructure projects have rallied markets.
The next hurdle the market is bracing for is the updated inflation numbers from the government this week. If these numbers come in too high, markets are likely to sell off in anticipation that the RBI will not be as likely to cut interest rates. If they come in low they could spur the markets forward. The RBI is walking a very fine line between trying to stimulate the economy but not adding to its inflation problems. A spike in inflation data in the week before the June 18th RBI policy update would decrease the probability, or at least size, of any liquidity measures from the RBI.
India ETFs are mostly positive this year despite the ups and downs of the Indian markets. Leading the pack are the small cap India ETFs, SCIF andSCIN. Here’s the year to date performance snapshot of all India ETFs.
Tickers Listed: EG Shares India Small Cap ETF (NYSEARCA:SCIN), EG Shares India Consumer ETF (NYSEARCA:INCO), EG Shares India Infrastructure ETF (NYSEARCA:INXX), WisdomTree India Earnings ETF (NYSEARCA:EPI), Market Vectors India Small Cap ETF (NYSEARCA:SCIF), Direxion Daily India Bull 3X Shares (NYSEARCA:INDL), iShares MSCI India Index (NYSEARCA:INDA), iPath MSCI India Index ETN (NYSEARCA:INP), iShares MSCI India Small Cap (NYSEARCA:SMIN), iShares S&P India Nifty 50 Index (NYSEARCA:INDY), PowerShares India (NYSEARCA:PIN), Direxion Daily India Bear 3X Shares (NYSEARCA:INDZ).
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.”