India: Mumbai Has The Worst Month Since The Crash … Now What? (PIN, INP)

Most emerging markets watchers know that India has been in a steep correction, but the depth of the downswing has still surprised a lot of people.

As of today, the blue-chip Sensex is down 10.6% just for January, more than giving up all of the ground it reconquered in December’s relief rally and marking the worst month for Indian stocks since October 2008′s terrible 23% lurch to the downside.

Naturally, macro conditions are nowhere near as bad as they were in the darkest weeks of the credit crunch, so it makes sense that Indian stocks are “only” correcting here — but the question is how far they go before bottoming out.

At this point, the Sensex has lost 12.4% from its November peak as food inflation fears, rising interest rates and scandals in India’s telecom sector unbalance global investor confidence.

Traders say that angst over Egypt is driving international capital flows away from the more liquid emerging markets — not out of a sense of contagion but simply because of a perceived need to do something to reduce overall risk.

Some technical levels to watch: Today’s sentiment-driven action pushed the Sensex well below the 200-day moving average at 18,725. If the market gets a bounce tomorrow, we could see it head up around 1.7% to regain that resistance level.

If not, the next support seems to be at the lower Bollinger band at 18,207 — another 1% down from here. Beyond that point, we are back at 5-month lows in Mumbai and some of these stocks really start to become long-term bargains.

This also applies to ETFs like the iPath MSCI India Index ETN (NYSE:INP) and PowerShares India ETF (NYSE:PIN).

Written By Tim Seymour From Emerging Money

Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.

About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.

Leave a Reply

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