Are Brighter Days Ahead for India’s ETFs?

February 26th at 11:00am by Tom Lydon

ETF IndiaIndia is a country marked by its entrepreneurial spirit, but some poor decisions or maybe just bad timing in the marketplace may have thrown the country’s economy and subsequent exchange traded funds (ETFs) off balance.

In particular, an Indian corporate jewel, Tata Motors, has gone from a success story to an example not to be emulated after only a year, writes Madhur Singh for Time. Tata’s commercial vehicle sales fell by 40% in India and exports dropped 45% in the fourth quarter. It reported a quarterly loss of $58.5 million, a first in seven years. The company also faces a June deadline where it must repay a $3 billion bridge loan used to buy Jaguar Land Rover (JLR).

At least Tata Motors appears to have evaded possible bankruptcy. It has laid off 850 employees at JLR and may continue with another 1,500 more. The purchase of JLR has come at a price of downgraded debt ratings, which is now at non-investment grade. Analysts also think Tata may have overpaid for JLR.

But the government has provided an economic stimulus for Tatar Motor in the form of a $200 million order for 1,625 buses, which includes a 12-year maintenance contract worth $280 million.

The Home Minister P Chidamabaram thinks the Indian economic downturn is “temporary” and October would mark the beginning of an upturn, according to The Economic Times. Due to domestic demand in 2008, India saw a growth rate of 7.1%, and the Home Minister is confident that the economy will go over 7% in 2009.

India’s inflation, however, is at 14-month lows, reports Kartik Goyal for Bloomberg. This increases the likelihood of a central bank rate cut.

  • WisdomTree India Earnings (EPI): down 0.8% in the last month; up 2% in the last three months

ETF EPI performance

  • PowerShares India (PIN): down 1.8% in the last month; up 1% in the last three months

ETF PIN performance

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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