Both the Indian equity market and the Indian rupee have experienced strong bouts of volatility in recent years. Amid the noise of central bank actions and macro-related policy debates, WisdomTree rebalanced its India Earnings index on September 20—the same day the new governor of the Reserve Bank of India (RBI) made his first policy announcement.
The timing of this Index rebalance and central bank meeting was a coincidence—the Index rebalance occurs at the same time every September. Each year, WisdomTree calculates the Earnings Stream of India’s equity market to identify firms that have generated positive cumulative profits. Qualifying companies are weighted by their proportionate contribution to the total Earnings Stream.
• Firms whose price levels have declined but whose earnings have either remained constant or grown tend to see increases in their weights at the rebalance.
This rules-based methodology applies a disciplined focus to firms’ fundamentals and relative valuations.