Most emerging markets ETFs are performing admirably Thursday, but India ETFs are among the leaders. The iShares India 50 ETF (NasdaqGS: INDY) and the WisdomTree India Earnings ETF (NYSEArca: EPI) are both up more than 3% and the catalyst is easy to spot.
Asia’s third-largest economy is taking steps to liberalize its embattled currency, the rupee. Through a deal with the World Bank, India will launch its first offshore rupee bond effort. The World Bank’s International Finance Corp. will increase the size of the offshore rupee bond market by selling $1 billion of the bonds to global investors, report Robin Harding and James Crabtree for the Financial Times.
The IFC will sell the bonds in dollars, convert the proceeds to rupees and invest them in India, according to the FT. Returns will be linked to dollar/rupee fluctuations, but the bonds will carry the World Banks’s AAA credit rating, a noteworthy feature because India is currently struggling to hold its investment-grade rating, the lowest among the four BRIC nations. [New Central Bank Leader Lifts India ETFs]
News of the World Bank/rupee bond scheme comes as the Indian currency, previously the worst performer in the developing world this year, is gaining steam. The rupee gained 9% against the dollar last month and outperformed the euro, British pound and other major currencies. [Rupee Goes From Worst to Better]
EPI, one of the largest India ETFs with $970.5 million in assets under management, recently rebalanced, adding some exposure to sectors that have been hit by the falling rupee.