With all of the negative attention generated by Chinese stocks this year, plenty of investors may be thinking it’s appropriate to take a pass on emerging markets equities.
That’s not the case, as an array of other developing economies, both large and small, are homes to thriving equity markets.
India is a prime example. Just look at the VanEck Vectors India Growth Leaders ETF (GLIN). While China exchange traded funds are sagging, GLIN is up 24.41 year-to-date.
Home to 82 stocks, GLIN follows the MarketGrader India All-Cap Growth Leaders Index (MGINGRNR), offering investors a fundamentally weighted approach to stocks in Asia’s third-largest economy and one that focuses on growth at a reasonable price (GARP). That index methodology makes a difference because it enable GLIN to sport large weights to tech stocks – a prime source of allure when it comes to India.
“Since the fund (GLIN) started tracking the index on 5/1/2020, it has held an average weight of around 30% in the Information Technology sector of which I.T. and Data processing services industries represented around 24% of the Information Technology exposure,” notes Carlos Diez of MarketGrader. “Since May 1, 2020, to the period ending 7/31/2021, the index returned 79.61% cumulatively of which around 30% of the contribution to positive return came from the following I.T. and Data processing services companies.”
As of July 31, GLIN’s weight to technology stocks was 27.8%, according to VanEck data, making that the fund’s largest sector exposure. That’s more than 900 basis points more than the MSCI India Index’s weight to the same sector.
Tech stocks in GLIN’s underlying index are delivering sales growth, and data confirm as much. Plus, profitability is taking off amongst the group.
“In the 12 months ended last quarter (March 2021), these 14 companies generated a combined $62.5 billion in sales, up 26% from $49.6 three years earlier. In other words, these 14 companies generated about one-third of all revenue booked by Indian-based IT Services companies based on McKinsey’s estimate of $194 billion for the entire industry,” adds Diez.
India is one of the largest, most robust technology markets outside the U.S., and the growth of segments like cloud computing only enhances the long-term potential of GLIN and its above-average tech exposure.
“Emerging technologies such as blockchain, cloud computing, artificial intelligence, and machine learning have given the country—and its technology leaders—an entirely new set of opportunities to accelerate the world’s drive toward a digital economy. Investors looking for a differentiated exposure to this opportunity should look to India,” concludes Diez.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.