Shares of various India-specific
soared Thursday, following bullish comments on Asia's
third-largest economy from Goldman Sachs. The WisdomTree India
Earnings ETF (NYSE:
), which has over $1.05 billion in assets under management making
it the largest India ETF, are up 3.2 percent after Goldman
forecast Indian GDP growth of 7.2 percent in 2014. That is well
above the bank's forecast of growth of 5.4 percent this year.
Goldman forecast GDP growth of 6.5 percent for India in 2013.
Declining oil prices, increased global demand and domestic
reforms are among the catalysts Goldman's cites as being
favorable to the Indian economy in the coming years,
Other marquee India ETFs are getting in on the act as well.
The iShares S&P India Nifty 50 Index Fund (NASDAQ:
) is up nearly 3.6 percent while the PowerShares India Portfolio
is higher by 2.7 percent.
Goldman also noted suggested reforms to India's power sector
look "promising," according to Barron's. Those comments could be
the reason the EGShares India Infrastructure ETF (NYSE:
) is higher by nearly 3.3 percent. India's infrastructure is
regularly viewed as decrepit and a significant hurdle for the
economy to overcome. So bad is India's power grid that earlier
this year a blackout there
left as many as 600 million Indians without
Investors and ratings agencies have been critical of India's
infrastructure and the government's lack of action on that front.
However, on expectations that situation is bound to change, INXX
has been on the best performer of three country-specific emerging
markets infrastructure ETFs year-to-date. On the other hand, it
should be noted INXX has handily trailed its Brazil and China
equivalents since the funds debuted in 2010.
Inflation, arguably the biggest problem facing the Indian
economy, could remain high through the third quarter of next
year, said Goldman. Since high inflation prevents near-term
easing in the form of interest rate cuts, Goldman sees the
Reserve Bank of India paring rates by 50 basis points in
each of the next three years starting in 2013
In its research note, Goldman also highlighted the recently
announced government reforms aimed at increasing foreign direct
investment as possible catalysts for the Indian economy. Earlier
this year, Indian policymakers reduced the country's punitive
diesel subsidy while making the country's massive insurance and
more open to foreign investment
. Additional liquidity was also provided to the country's
Small-cap ETFs are participating in today's rally as well. The
Market Vectors India Small-Cap ETF (NYSE:
) is higher by 3.3 percent on above average volume while the
EGShares India Small-Cap ETF (NYSE:
) is up 2.4 percent.
The Goldman comments come just two days after Moody's
Investors Service reiterated a stable outlook on India's
sovereign debt rating. Moody's also affirmed a Baa3 credit rating
for India, which is one notch above non-investment grade status.
That news was seen as crucial to India's chances of retaining its
investment-grade credit, which is already the lowest among the
four BRIC nations. Moody's, Standard & Poor's and Fitch
Ratings all have the lowest investment-grade ratings on India's
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