Is this a flash in the pan or a sustainable rally?
One of the main factors driving the rally is hopes of a better business climate after general elections which are scheduled for May.
According to Wikipedia...
By constitutional requirement, elections to the Lok Sabha must be held at most every five years or whenever parliament is dissolved by the president. The previous election, to the 15th Lok Sabha, was conducted in April–May 2009, and its term will naturally expire on 31 May 2014...
Since the last general election in 2009, the 2011 Indian anti-corruption movement by Anna Hazare, and other similar moves by Baba Ramdev, have gathered momentum and political interest.
ETF's focused on India have underperformed those focused on China over the last five years. This may be setting up a buying opportunity.
Emerging markets have been under pressure over the last few months as tensions heighten in the Ukraine and money flows back into the US. But not everybody agrees...
BlackRock’s Sam Vecht says investors are following the herd in selling emerging markets to invest in the most-developed economies, a strategy that has historically yielded “underwhelming” results. Bloomberg
Conclusion: Buy
In the next two months prices should go up in anticipation of the new government's arrival. During the next year, the government will probably take strong measures to stimulate the economy and people will be hopeful they work.
Indians value education, hard work and are outward looking, so the long term trend should be positive. Some have blamed recent stagnation on government bureaucracy and corruption. With a new party gaining ground on fixing those issues, meaningful change may be in the cards.
This is out of favor sector with good long term potential. Recent events have set up a buying opportunity.
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