Bringing Credibility to Monetary Policy
Since Raghuram Rajan’s appointment as governor of the Reserve Bank of India (RBI), he has worked tirelessly to establish the RBI’s reputation as a credible inflation-fighting central bank. The RBI has eased its inflation tone and maintained that monetary policy will be accommodative. More recently, the RBI cut the repo rates 25 basis points, bringing it from 8% to 7.75%.9 The timing, about a month ahead of India’s much-awaited budget, is a strong acknowledgement of reduction in inflationary pressures driven by plummeting global oil prices, which have been a windfall for oil-importing economies like India. Also, the Indian rupee has become much more stable recently, boosting the confidence of foreign investors.10
WisdomTree is a long-term bull for India based on its very favorable demographic trends. Key risks for India have typically been very high market expectations, high inflation rates and government corruption, which has been a bottleneck on the economy. The trends appear to be going in the right direction. For those looking for continued improvement, having EPI—which is broadly representative of the Indian market and economy but also employs a process to manage equity valuation risk—as part of their equity strategy might be an attractive way to gain exposure to India.
1Source: WisdomTree, as of 12/31/14.
2Source: WisdomTree, as of 12/31/14.
3Sources: WisdomTree, Bloomberg, as of 12/31/14.
4Sources: WisdomTree, Bloomberg, 12/31/13‒12/31/14.
5Sources: WisdomTree, Bloomberg, 12/31/13‒12/31/14.
6Sources: WisdomTree, Bloomberg, 12/31/13‒12/31/14.
7Sources: WisdomTree, Bloomberg, 12/31/13‒12/31/14.
8Sources: WisdomTree, Bloomberg, since Index inception, 12/3/07‒12/31/14.
9Source: Reserve Bank of India, 1/15/14.
10Source: Bloomberg, 12/31/13‒12/31/14.
Important Risks Related to this Article
There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. The Fund focuses its investments in India, thereby increasing the impact of events and developments associated with the region, which can adversely affect performance. Investments in emerging, offshore or frontier markets such as India are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments. As this Fund has a high concentration in some sectors, the Fund can be adversely affected by changes in those sectors. Due to the investment strategy of this Fund, it may make higher capital gain distributions than other ETFs. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile.