India ETF products that are non leveraged experienced a tough week as S&P downgraded their outlook on India from stable to negative. This means that India's credit rating, currently the lowest rating on the investment grade scale, is in jeopardy. Indian markets reacted to this news sending India ETF products like EPI, PIN and INDY down around 3% for the week. Here's last week's India ETF performance grid snapshot from IndiaETFs.com.
India is facing increasingly strong head winds as markets are nervous about factors including the rupee's slide in value, recent budget and tax measures from the Indian government, the mounting fiscal and current account deficit and oil prices. All that concern did not need the addition of the S&P downgrade, but it was the result of the lack of fiscal discipline and political progress from the government of India that forced S&P to act.
Good Year Gone Bad
India ETF products and the markets they track began the year strong but now appear on a downward trend that is gaining momentum. Internal issues are to blame and they are multiplying. From corruption to lack of promised reforms, India can't seem to get out of its own way each week.
Despite all the noise however, India ETF products without leverage all remain positive for the year. These gains are slowly eroding however. Here's the year to date India ETF performance grid snapshot from IndiaETFs.com. Notice the two leading ETFs, SCIF and SCIN, continue to be small cap funds.
Going forward, considerable caution is prudent for the India ETF investor. With political, fiscal and social issues cropping up, it appears that the greater risk is on the downside, not missing the upside.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Christian Magoon publishes IndiaETFs.com.