Chartwell Global ETF Report

By Carl Delfeld of the Chartwell ETF Advisor

As Bombay's SENSEX index broke 18,000 for the first time yesterday, many are wondering if the market and the exchange-traded funds that track it such as (INP) can keep the momentum going. Valuations of the leading companies that carry a lot of water for the top heavy index are always a concern. But the key risk over the long haul is politics and its impact on economic reforms.

I agree with the thinking that India's democracy is a crucial advantage over its rival China's authoritarian government but India's fragmented coalition system creates a complex situation almost unfathomable to locals and foreigners alike.

Incredibly, Indias coalition government led by the Congress Party essentially is stuck with Communist "allies" that block or modify just about every important legislation on the table. Some investors may think, forget the politics, look at the robust growth of India's economy but this misses the point that growth it is not sustainable without major reforms in areas like labor, trade and opening up foreign investment for infrastructure development not to mention foreign relations. One example, retailers like Wal Mart are facing stiff opposition to expand into India even though they have strong domestic partners.

On the foreign relations side, the Communist Party has signaled strong opposition to the nuclear deal with the United States and although the situation may be defused for a time, the threat of withdrawing support from the coalition would topple the government. If this were to happen, fresh elections would need to be called ahead of 2009 when the current five-year term of the government ends.

In comparison, America's two party system looks absolutely fabulous.

Find out what the best way to play 10% annual economic growth by joining the Chartwell ETF Advisor.