🤯 Have you seen our AI stock pickers’ 2024 results? 84.62%! Grab November’s list now.Pick Stocks with AI

Another Blow For India ETFs: JPMorgan's No Fan

Published 08/21/2013, 12:40 AM
Updated 05/14/2017, 06:45 AM

Exchange traded funds tracking India, the "I" in the venerable and now infamous BRIC acronym, really do not need any more bad news.

Already the worst performers among the single-country BRIC funds, India ETFs have been beset by sagging growth, a plunging rupee that has touched multiple record lows against the U.S. dollar and a widening current deficit, it would seem investors would be running short on negative tidings pertaining to Asia's third-largest economy.

JPMorgan sees things differently. During Tuesday's Asian session, the bank downgraded its rating on Indian stocks to Neutral from Overweight. To its credit, JPMorgan acknowledged it was late in downgrading India, but said if the rupee continues to tumble, Indian stocks would continue to lag, Reuters reported.

Citigroup chimed in, paring its target on the BSE Sensex to 18,900 from 20,800. All that just a couple of weeks after Goldman Sachs pared its rating on the country's stocks to Underweight. And all that as seven India ETFs reside on the list of the 18 worst-performing ETFs over the past month. That list includes the Direxion Daily India Bull 3X Shares (INDL), which underwent a 1-for-4 reverse split yesterday.

That list also includes the Market Vectors India Small-Cap ETF (SCIF), which was reverse split 1-for-4 at the start of July.

Underscoring just how bad some ETFs have been this year, the EGShares India Consumer ETF (INCO), the EGShares India Small-Cap ETF (SCIN), the EGShares India Infrastructure ETF (INXX) and the iShares MSCI India Small-Cap ETF (SMIN) have all posted declines of at least 16 percent in the past month and none of those funds reside on the aforementioned list of India ETF infamy.

There have been times this year when Indian stocks and ETFs looked good. There were even times when foreign investors were putting capital to work in Indian equities, but the falling rupee and talk of Federal Reserve have put those themes to rest.
Foreigners have pulled about $12 billion from local stocks and bonds while the rupee has plunged 14 percent since May 22 when tapering chatter began in earnest, according to Bloomberg.

A simple way of looking at the rupee recently has been to say if the forex market is open, there is a good chance the Indian currency is touching another record low against the dollar. That is how regularly the rupee has been hitting record lows against the greenback.

That regularity is frightening given the Reserve Bank of India's efforts to stem the currency's slide. RBI has has raised the marginal standing facility and bank rates, capped injections into the financial system and tightened banks' daily reserve requirements to curb money supply, Bloomberg report. And that is just since last month.

Over that same time, all five of the India ETFs with at least $200 million in assets under management have posted declines in the teens on a percentage basis with the iPath MSCI India Index ETN (INP) being the worst offender. Since May 20, all five have tumbled by more than 20 percent, meaning all five are officially in bear market territory.

BY Todd Shriber, ETF Professor

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.