Some view International stocks are experiencing a resurgence this year. And developing world equities aren’t just participating in the trend. They’re contributing leadership as highlighted by the MSCI Emerging Markets Index being up 16.7% YTD as of July 1. For investors looking to express tactical views on various developing nations, India’s still-sturdy economic profile could boost the allure of ETFs like the WisdomTree India Earnings Fund (EPI ) and the WisdomTree India Hedged Equity Fund (INDH ).
EPI is one of the oldest and largest India ETFs. And INDH, which turned a year old last month, is delivering admirable performance even in the face of a weak U.S. dollar.
Among single-country ETFs, EPI has been a star in recent years, confirming the strength of India stocks. But that has some global market participants worried that India companies may not be able to generate the earnings and ROE growth that propelled the prior bull market. Some market observers believe investors should take a holistic view and evaluate reforms and India’s steadiness amid global turmoil as potential catalysts for assets such as EPI and INDH.
India ETFs Have Long-Term Appeal
Some view single-country ETFs as tactical choices. That implies some investors don’t hold these funds for extended periods of time. Owing to India’s powerful demographic trends, market participants may want to consider taking the long view of funds like EPI and INDH.
“Demographic shifts, a swell of government spending on technological and physical infrastructure, and efforts to own entire value chains to innovate and scale in critical industries are all contributing to the positive outlook for India,” according to Morgan Stanley.
Adding to the case for ETFs such as EPI and INDH are expectations for robust GDP growth in India. Many emerging markets have posted impressive GDP growth in years past without much response from the related ETFs. But the outlook for India’s economy may be too compelling to ignore. And it could have positive implications for India stocks.
“Morgan Stanley economists have forecast India to be the fastest-growing economy in the near future, with GDP expansion of 5.9% in 2025 and 6.4% in 2026, after growth of 6.2% last year,” added the bank. [“Uncertainty from external factors will remain. But] strong domestic demand will provide essential momentum to keep India’s large, diverse economy on track to become the world’s fourth-largest this year.”
Potentially boosting the case for EPI and INDH are other factors that could indicate it’s worth embracing India’s elevated equity valuations.
Reinforcing India's Growth Story
“Meanwhile, a number of factors further reinforce India’s growth story: easier monetary policy from the Reserve Bank; well-controlled inflation; and government efforts aimed at longer-term structural support and flexibility to step in with spending to bolster the economy if required in the near term,” concluded Morgan Stanley.
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