The election in India signaled the potential for stronger economic growth and Indian stocks rose 23% on the news.
Prime Minister Manmohan Singh’s victory was the biggest by any Indian politician in two decades, freeing him to form a government without needing the support of communist lawmakers who have blocked efforts to attract direct foreign investment.
Even before the election news, the WisdomTree India Earnings Fund (EPI) had signficantly outperformed the SPDR S&P 500 ETF (SPY). With today’s run up, EPI is now up 69% in the past 3 months compared to up 16% for SPY.
EPI tracks an earnings weighted index of companies incorporated and traded in India that are profitable and that are eligible to be purchased by foreign investors. Top holdings include Reliance Industries, Infosys Technologies and Oil & Natural Gas Corp.