Trends of Indian ETF’s in US Stock Market

There are four major Indian funds tradable in the United States: EPI, PIN, INP, and FNI. Each of the above fund trades just like a regular stock. EPI and PIN are the only two pure Exchange Traded Funds (ETF’s). INP tracks the MSCI Total Return Index, while FNI invests in China as well as India.

Each fund was started in February of 2008, just after the market peaked. The following chart shows the change in value of the funds from February 2008 to November 2009. As we can see, these funds track each other extremely closely. (Click here)

Consequently, my analysis of each of these funds will be pretty much the same. So let me will just analyze EPI. (Click here)

On the daily timeframe, we see that the EPI collapsed in 2008 very similarly to the rest of the stock market. India’s fortunes are still tied to the United States and to the global economy. I feel that those who predict a ‘decoupling’ of emerging markets and the United States are still premature in their assessment. (Click here)

Recently, EPI broke its uptrend on the fourth test. This break led to a test and failure of the 50 day moving average, but EPI was able to quickly recover. EPI remains above its rising 50 and 200 day moving averages. However, if EPI continues to climb, it will likely appreciate at a slower rate. (Click here)

On the shorter hourly timeframe, we see the choppy action that characterizes funds that follow foreign equities. EPI owns stocks that trade on Indian exchanges. Since the Indian market is open at different hours than in the United States, EPI will typically gap open to compensate for any overnight changes.

The increasing volume during the second half of EPI’s 9 month rally is also of note. Typically, increasing volume with increasing price is a bullish sign. The volume of these new ETFs, however increase as they become more popular and familiar to traders. Increasing volume should therefore be discounted as a signal.

Overall, EPI remains fairly strong and bullish. Nonetheless, EPI may be over extended after bolting upwards over the past 9 months; caution is advised.

-Alexander Thornton

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One Response to Trends of Indian ETF’s in US Stock Market

  1. Alex,

    After looking at the S&P CNX 500 for India, it seems that these funds correlate directly proportionally to the stock market in India. I have to agree with you that these funds are probably overbought because they seem to fluctuate with the tendencies in the US stock market, and many analysts believe that the US market is still not over the hump. Although Jay Singh stated that India was not impacted as harshly as the US in the global banking crisis because most of the people do not use loans as investments, it would be unwise to believe that these funds will stay bullish in the short term. However, I will keep an eye out to buy some if they do fall!

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