Indian Market Correction Offers a Buying Opportunity

Feb.10.11 | About: WisdomTree India (EPI)

As Canadian markets celebrated record oil and gold prices, Indian markets tumbled. From the Ides of March 2009, the Bombay Sensex had made a spectacular recovery and hit an all-time high of 21,000 last November. Since then, it is down 16%. With a weaker Rupee, EPI, the Wisdomtree India ETF is down 23%. To paraphrase Caesar, "Ouch!"

As a net importer, higher oil prices hurt India. Industrial production growth slowed sharply to 2.4% in late 2010 from about 11% mid-year. Food price inflation in the high teens soured moods further. To curb inflation, the central bank doubled the short-term interest rate to about 7% with successive raises. Fearing a broader slowdown, foreign investors sold a net $1 billion worth of stocks in January.

But a 23% correction is a good time to buy what is otherwise a solid economic story. Growth is expected to hold near 8 to 9%. Inflation, including food, is coming down. The 2011 Budget, due 28 Feb, is expected to show improved government finances, partly due to a big sale of wireless telecom rights. Export growth of 36% in 2010 has shrunk the trade deficit to $2.6 billion from nearly $12 billion a year ago.

Confirming the fundamentals, our archerETF Oscillator is signalling a buy (see below), suggesting patience if you already hold EPI and action if you don't.

archerETF Metrix EPI
Category EM Markets
Benchmark MSCI India
Total Holdings 143
52 Week High 28.68
Recent Price 22.012
52 Week Low 20.33
Avg Daily Volume 3.05 Million Shrs
Avg Daily Volume ($) $67.20 Million
Total Market Cap $1.56 Billion
ETF Annual Fee 0.0088
ETF Trading Currency USD
ETF FX Exposure INR
Annual Volatility 36%
Correlation to S&P 500 79%
Return to Risk Ratio Not Available
Use of Leverage No
Use of Futures No
6 month Return -7%
1 Year Return +7.6%
2 Year Return +108%
3 Year Return Not Available
Dividend Yield (NYSE:TTM) 0.64%
Click to enlarge


Disclosure: I am long EPI.