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India ETFs Pop on Strengthening Economic Data, Election Hopes

This article was originally published on ETFTrends.com.

India country-specific ETFs surged Tuesday, with small-cap Indian stocks leading the charge, as investors looked beyond the trade talks to a possible second term for Prime Minister Narendra Modi in the upcoming elections.

Among the leaders of the market on Tuesday, the iShares MSCI India Small-Cap ETF (SMIN) rose 3.9%, VanEck Vectors India Small-Cap Index ETF (SCIF) gained 6.2%, WisdomTree India Earnings ETF (EPI) advanced 3.5% and iShares India 50 ETF ( NasdaqGM: INDY) increased 2.9%. Both EPI and INDY also broke back above their long-term resistance at the 200-day simple moving average.

Fueling optimism in the Indian markets, many looked to the potential re-election of Prime Minister Modi in the upcoming election season, Economic Times reports.

Top Dalal Street names are confidence Modi' will return as Prime Minister in the upcoming elections after the border scuffle with Pakistan. The border skirmish between India and Pakistan strengthened the popularity of PM Modi whom is viewed as a more stabilizing leader.

“A tough stance against a threat from Pakistan-based terrorists has won Prime Minister Narendra Modi praise from the Indian public, which in our view could translate into electoral gains for him and his Bharatiya Janata Party in national elections in May,” according to Abhishek Gupta, an economist with Bloomberg Intelligence.

Furthermore, a sharp appreciation in the Indian rupee currency against the U.S. dollar - the USD weakened 0.6% against the INR to INR70.49. Investor's believed the stronger currency could attract more foreign private investment inflows. A the dip in crude oil prices also bolstered the bullish sentiment.

Meanwhile, market sentiment also strengthened on a boost in India's services and manufacturing activity, which both gained momentum in February, driven by rising new work orders that fueled a faser increase in output and job creation.

"While today’s gains may extend in the coming sessions, we prefer to remain cautious on equities at higher levels. Domestically, the extent of geopolitical risk between India and Pakistan will be closely monitored. Any re-escalation in the coming days could be negative for the stocks. Globally, the developments on US-China trade front, progress on Brexit and movement of crude oil prices and currency would be actively tracked by the investors. Investors should continue to accumulate fundamentally sound companies with strong growth prospects. Considering high volatility, traders should avoid taking any risky leveraged positions," Jayant Manglik, President - Retail Distribution, Religare Broking, told the Economic Times.

For more information on India’s markets, visit our India category.