Following recent national elections, India equities and related ETFs retreated a bit. That’s because Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) failed to capture the massive victory some market observers expected.
Those concerns and the related pullback were short-lived. That was highlighted by the fact major India equity benchmarks hit all-time highs earlier this week. And some of the related U.S.-listed ETFs joined the party. For example, the WisdomTree India Earnings Fund (EPI ) — one of the oldest and largest ETFs in the category — hit a new high on Tuesday. That extended a run in which it’s surged nearly 8% over the past month.
Resurgent India stocks are also propelling new ETFs. The WisdomTree India Hedged Equity Fund (INDH ) is just two months old. But it’s gained 9.30% since inception, including a 6.28% rally for the month ending July 9.
India Rally Rooted in Fundamentals
Recent price action by EPI and INDH suggests investors have moved past concerns about BJP disappointment. They’re now likely focusing more intently on what Modi’s third term could look like. That includes expectations of tax relief and measured infrastructure spending. Both of those could bolster sentiment toward India equities.
“Going forward, investors remain bullish that the Modi government will unveil more investor-friendly programmes, including easier taxation measures, in the next budget, which is expected to be introduced during parliament’s budget session starting on July 22,” reported Biman Mukherji for the South China Morning Post.
As reported by the Post, a November survey conducted by Preqin indicated 59% of those polled view India as one of the most potentially rich emerging markets. That’s more than triple the percentage that said the same of China. That could signal professional investors are bullish on some of the stocks held by EPI and INDH.
Positive Impact on Additional Front
Investors coming to grips with how Modi’s government will function in his third term is having a positive impact on another front. Data indicates international market participants have been recent buyers of India shares.
“Foreign buying on a net basis topped $4 billion since the start of June, more than making up for their sales in April and May, according to data compiled by Bloomberg. India saw the inflow as investors’ concerns about policy continuity — following Prime Minister Narendra Modi-led party’s surprisingly lackluster showing at the June 4 election — dissipated,” reported Ashutosh Joshi for Bloomberg.
It’s not just foreign investors that are propping up India stocks. Mutual funds and other pros in the country have allocated $28 billion to equities there this year, according to Bloomberg.
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