Downtrodden, terrible and tumultuous are all adjectives that
are applicable to the performances turned in by various India
ETFs this year.
Slowing economic growth, a plunging rupee, widening account
deficit and a government viewed by outsiders as incapable of
handling the woes facing Asia's third-largest economy are among
the reasons India ETFs have been dismal performers this year.
More Misery Ahead For India ETFs
Desperate to jolt the once vibrant economy, India's government
approved a spate of infrastructure projects worth 1.83 trillion
rupees. Highlighting just how
weak the rupee
is against the dollar, that works out to be about $28.5
Still, news of India's infrastructure largess could be of some
benefit to the EGShares India Infrastructure ETF (NYSE:
). INXX has not been immune to the shocks suffered by other India
ETFs this year. Year-to-date, INXX is down 38.3 percent. The fund
has not traded above its 200-day moving average since May,
confirming its status as an ETF locked in a bear market.
News of the infrastructure plans did little to help the rupee,
which traded around 65.715 at this writing at 3:30AM Eastern time
Tuesday. Emerging markets investors long seduced by the promise
and potentially positive impact of infrastructure spending know
that it takes time for these projects to get started, let alone
bear fruit, so an immediate pop for INXX may not be in the
In theory, INXX should benefit from increased Indian
infrastructure spending if for no other reason than that the
country's decrepit infrastructure, particularly when compared to
China, has long been viewed as a significant obstacle for the
Indian economy. INXX devotes nearly 61 percent of its combined
weight to industrial and utilities stocks, which should be
beneficiaries of increased infrastructure spending.
It is, however, worth remembering that developing world
infrastructure announcements often have mixed results for ETFs.
Last year, Brazil ETFs got a short-term pop when that country
announced a $66 billion infrastructure program. Same goes for
ETFs for Thailand when that country unveiled a plan of similar
earlier this year
Brazil and Thailand ETFs have proceeded to plunge. That and
the fact that India's infrastructure plan is not even half as big
as the Brazil and Thailand plans could put a lid on near-term
upside for INXX.
At least investors will not pay up for a stake in INXX. As is
the case with so many emerging markets ETFs these days, the fund
is cheap on a valuation basis. The 10-year average P/E ratio for
the MSCI India Index is 18,
according to WisdomTree data
. The P/E on INXX's underlying index is 15.92 with a
price-to-book ratio of 1.18.
For more on ETFs, click
Disclosure: Author owns none of the securities mentioned
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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