Although India does not have an exchange traded fund (ETF), it does have the exchange traded note iPath MSCI India Index ETN (INP) and the closed-end fund India Fund (IFN). As Bombay’s SENSEX index broke 18,000 for the first time earlier this week, many investors are wondering if the market and these funds that track it can keep the momentum going. One of the key risks that threatens India’s growth is political problems. Currently, INP is up 50.9% year-to-date, and IFN is up 23.3% year-to-date.

Incredibly, India’s coalition government led by the Congress Party essentially is stuck with Communist "allies" that block or modify just about every important legislation on the table, says Carl Delfeld for ETF XRAY. Even though the funds are doing well currently, if these political difficulties aren’t ironed out, they could dampen trade and foreign investment for India’s neighbors. Just this week more than 7,000  local trade workers in India came to Azad Maidan to protest Wal-Mart (WMT) and Germany’s Metro (MEOG.DE) because they view the companies as a threat to their livelihood, reports Nandini Lakshman for BusinessWeek.

However, on a positive note for India and its funds, the country is in the process of creating an inexpensive car. Next fall, the Indian automaker Tata Motors is scheduled to introduce its eagerly anticipated "People’s Car" that has a $2,500 price tag, reports Heather Timmons for The New York Times. India is set to overtake China next year as the fastest-growing car market, according to estimates by CSM Worldwide, an auto industry forecasting service. It will be very interesting to see how the new People’s Car will impact the global auto industry, not to mention India’s economy and funds.


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.