India ETF Lowest Since 2009 on Plunging Rupee

August 6th at 9:18am by Tom Lydon

India’s slowing economic growth and sharp depreciation of the rupee currency have pushed an India country-specific exchange traded fund to its lowest level since 2009.

The WisdomTree India Earnings Fund (NYSEArca: EPI) was down 1.1% Monday, trading around $15.30 a share. The fund has declined 19.8% year-to-date. [Are India ETFs Becoming The New Brazil ETFs?]

Foreign investors have been pulling out of India’s equity market as Indian stocks suffer through an eight-day drop. India on Tuesday named Raghuram Rajan, a former chief economist for the International Monetary Fund, as its new central bank governor, the Financial Times reports.

“The investment case for India has turned less favorable,” Goldman Sachs said in a note to clients, reports Ashutosh Joshi for the Wall Street Journal. The bank noted that the decline in the rupee has particularly hurt foreign sentiment – a weaker rupee would lower returns even further when converting rupee-denominated investments over to another foreign currency.

Adding onto the weaker rupee, India has incurred a trade deficit with 80 countries, The Economic Times reports. A trade deficit occurs when the balance of exports is lower than imports, which leads to a loss of value in India’s exchange rate.

“India has a trade deficit with 80 countries in 2012-13. Top ten countries are China, Switzerland, Saudi Arabia, Iraq, Kuwait, Qatar, Venezuela, Nigeria, Australia, and Indonesia,” Commerce and Industry Minister Anand Sharma said in the Economic Times article.

The WisdomTree Indian Rupee Fund (NYSEArca: ICN), which tracks the value of the Indian rupee relative to the U.S. dollar, has depreciated 10.6% over the past three months and is down 7.5% year-to-date.

In fact, the Indian rupee fell to a new record low versus the U.S. dollar.

The Indian economy is weaker, growing 5% in the year ended March 31, its slowest pace in a decade. The Reserve Bank of India now expects the economy to expand 5.5% for the year ending March 31, 2014 from 5.7% earlier.

WisdomTree India Earnings Fund

For more information on India, visit our India category.

Max Chen 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.

Tickers

EPI ICN