India ETFs: BRIC’s Shining Stars

If the saying “There’s always a bull market somewhere” is accurate, this year’s bull market among the BRIC nations is India.

India is home to the top-performing BRIC equity market this year and as a result, the WisdomTree India Earnings Fund (EPI) , the largest India ETF, is higher by 2.4%. Not a jaw dropping gain, but one that is superior to popular diversified emerging markets ETFs. With emerging markets ETFs this year, gains are gains. EPI can boast of that while the iShares China Large-Cap ETF’s (FXI) , iShares MSCI Brazil Capped ETF (EWZ) and the Market Vectors Russia ETF (RSX) are each saddled with unfortunate 2014 performances. [Emerging Markets Stocks Losing Prestige]

Over the past 90 days, EPI and the iShares India 50 ETF (INDY) have traded higher while the aforementioned BRIC funds have each lost ground. Examining India’s strength relative to the broader emerging markets complex indicates stocks in Asia’s third-largest economy could be poised for further upside after flailing in 2013 due to rampant inflation, a plunging rupee and widening account deficit.

“It looks to me like India is the big winner relative to the whole Emerging Markets space. Here is the pure price action showing India bumping up against a major downtrend line from 2010. Just like in the relative chart, I think that false breakdown last year could be the catalyst to really send this one higher,” writes Eagle Bay Capital President J.C. Parets.

Chart Courtesy: Eagle Bay Capital

Other noted technicians have recently highlighted strength in EPI.

“From a shorter-term view India ETF (EPI) is reflecting some relative strength compared to EEM year to date, which has now brought it up against a year-long resistance line above,” said Chris Kimble of Kimble Charting Solutions last week.

Although India ETFs have impressed relative to other major BRIC ETFs (EPI and INDY are both up more than 6% in the past month), some U.S. investors appear apprehensive that these ETFs can keep climbing, a notion highlighted by outflows from India funds.

However, what investors should pay attention to as it pertains to India is institutional buying. Pensions plans, endowments and sovereign wealth funds are buying Indian stocks and those are investors with long-term views, indicating they see current value and future upside in Indian equities. [Some Investors Return to India]