Wednesday, June 26, 2013

Thousands of people are feared dead from the worst Indian monsoon season in decades and more rain is in the forecast.  The benchmark Bombay Sensex Index has held up better than most emerging markets this year, down about 4%, but if you bought it with US dollars it has been much worse as the Indian Rupee has been washed out with the rain.  Quant doesn’t analyze weather or currencies but the EGShares India Infrastructure Fund (INXX) has risen with the flood levels up to today’s 4th place.  It ranked as low as 213th place on June 7th before the rains.

Calling bottoms is tricky and INXX is at the lowest point of its almost three year life as other India funds struggle to hold above their 2012 lows.  Its 57.4 technical score is evenly balanced across the three timeframes but is nothing to get excited about.  Sentiment is better at 68.6 as bears watch the water rise and the Rupee fall.  Global Theme and Quality scores are below 50 which contribute to a higher than average 6.37 Red Diamond Risk Rating so keep a close on eye on this one if you put it in your portfolios.  The reason Quant has highlighted INXX is its 97.2 Fundamental Score with high 90s across all four fundamental categories.  That accounts for half of the Green Diamond Reward Rating which comes in at 9.77, today’s second highest. India’s government knows they need to do more to develop their infrastructure and announced plans yesterday to ease caps on foreign direct investment.

That should help to support the Rupee as companies rush in to help rebuild that infrastructure so their planes, trains and autorickshaws can reach more of the country’s 1.2 billion people.  India’s travel and telecommunications infrastructure was famously inadequate even before the monsoon washed so much of it away and the 30 companies in INXX should benefit from the rebuilding efforts. Our thoughts and prayers go out to the suffering people in India but Quant is a cold, heartless algorithm lacking any such sentiment.  INXX is one of several higher risk names reaching the upper ranks which may suggest a bullish reversal, or it could be these names have just gotten too washed out.  If you think emerging markets are due for a bounce, take a look at INXX but don’t forget to also keep an eye on the Rupee.

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