India ETFs in Bull Market Territory
February 26th 2012 at 6:00am by Tom Lydon
India’s stock market is in a bull market rally, rising around 20% off the December lows on major indices.
“In the last decade, India’s annual economic growth averaged close to 9% a year, thanks to economic liberalization, which included the opening up of foreign investment and trade, privatization, improved industry regulations, and capital market reforms. Even during the 2008 global financial crisis, India was able to continue growing at around 6%,” Patricia Oey wrote in a Morningstar fund analysis.
Major, long-only ETFs such as the iShares S&P Nifty Fifty Index Fund (NYSEArca: INDY) made gains this past week up to 5%. Indian markets are on the rise due to reports on lower inflation and the possibility of interest rate cuts in the near future.
The Indian stock market is now in bull market territory based on a 20% rise from lows hit in December on major indices such as the Sensex, reports Christian Magoon for Seeking Alpha. According to a recent report from Bespoke Investments, a bull market in India is based on the Sensex and two other variables – the average gain and length of previous bull runs. The Sensex has been in bear market territory since November 5, 2010. [India ETFs and the Emerging Market Rebound]
Since 1986, the average bull market in India gained 111%. The average duration of a bull market was 394 days, indicating healthy gains ahead if history repeats itself.
In 2011, India’s ETFs were anchored in bear market territory due to inflationary pressure, a de-valued rupee, and foreign capital investment leaving the country. In 2012, the picture has changed for India, with about $2 billion in foreign investment returning.
The largest momentum for the Indian economy stems from Composite Leading Indicators (CLIs) that are calculated by the Organisation for Economic Cooperation (OECD). [India Leads Bubbling BRIC ETFs]
“The CLI for India rose to 95.6 in December, 2011, from 95.1 in November. In September and October last year, the same stood at 94.6″, according to the Press Trust of India. [Best Emerging Market ETFs]
Domestic consumption is rising again in India and overall investor confidence seems stable toward the country. Furthermore, as China and Brazil, two of the larger emerging economies, are on a slowdown, India is positioned to gain more investor interest.
Other India ETFs:
- PowerShares India (NYSEArca: PIN)
- WisdomTree india Earnings (NYSEArca: EPI)
- India Small-Cap Index ETF (NYSEArca: SCIF)
Tisha Guerrero contributed to this article.
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.