How India, ETF Can Stay Strong After Attacks

Divergent opinions are being floated around regarding the attacks on Mumbai, India and its affect on India’s exchange traded funds (ETFs).

Carl Delfeld for ETF XRAY writes how the attack is another burden on India and how increased tension with Pakistan and the disputed Punjab region may be a more pressing matter compared to economic growth.

As India is affected by a global credit crunch and rupee’s decline, most economists have cut India’s GDP growth in half for 2008 and 2009. The Sensex, India’s leading stock market index, has been diminished by half its worth since January as foreign investors funnel billions out of the country.

• The India rupee ETF WisdomTree Dreyfus Indian Rupee Fund (ICN) is currently down 9.1% since its May 22 inception.

• PowerShares India Portfolio (PIN) is down 58.1% since its March 5 inception

Delfeld predicts that India’s economy may drop even further and the best point of entry into India markets is in three to six months’ time.

Then there are optimists who think relations have matured to a point between India and Pakistan where the two countries will shrug off incidents caused by unsavory elements such as terrorists or extremists who disapprove of peace and cooperation between the two countries, according to Cherian Thomas for Bloomberg.

It is said that Bombay Stock Exchange rose on the first trading day after attacks - it was business as usual and there seemed to be no signs of panic among investors. As long as relations with Pakistan do not falter after the attacks on Mumbai, India’s economy may be poised to outperform expectations.

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