India ETF In Focus On Recent Rate Hike
Zacks Investment Research | Feb 02, 2014 02:53PM ET
India, it seems, is destined for stubborn inflation and repo rate hike. On January 28, the Reserve Bank of India (RBI) unexpectedly hiked its repo rate by 25 bps to 8% in a bid to contain inflation. With the latest hike, India raised its repo rates by the same amount three times in the past five months.
The Indian economy has been a victim of slowing economic growth, persistent sky-high inflation, huge current account deficit, lower per-capita income and massive corruption. After a roller-coaster ride in much of 2013 on the Fed’s taper concerns and falling currency (down about 14% in 2013), concerns over the Indian market have been mounting since the beginning of this year thanks to the Fed’s decision to start scaling back its QE program.
Investors should note that India’s inflation rate at more-or-less 10% is presently one of the highest in Asia. With a possibility of continued QE trimming and flight of foreign investments from the nation, Indian currency – rupee – is likely to weaken further in the coming days and stir up another round of inflationary pressure. While GDP growth outlook remains brighter than many fast-growing developed markets. Thus, India ETFs could be worth a closer look by risk-tolerant emerging market ETF investors at this time.
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