India was one of the best-performing emerging markets last year, a trend that some market observers believe will be persistent in 2018.
The WisdomTree India Earnings ETF (NYSE: EPI) and the iShares India 50 ETF (NASDAQ: INDY), two of the largest exchange traded funds dedicated to Indian stocks, gained 39.1% and 36.1%, respectively, last year.
India small-cap ETFs, including Market Vectors India Small-Cap Index ETF (NYSEArca: SCIF), EGShares India Small Cap ETF (NYSEArca: SCIN) and iShares MSCI India Small-Cap ETF (NYSEArca: SMIN) were among the best-performing single-country emerging markets funds in 2017. On Thursday, several India ETFs hit all-time highs.
“India’s projected potential growth is 6.7% per annum (p.a.). China and Indonesia jointly rank second-highest, both with projected potential growth of 5.5% p.a.,” said Fitch Ratings. “The estimate for China represents a significant slowdown from recent historical average growth and reflects both a deteriorating demographic outlook and a slowdown in the rate of capital accumulation as the investment rate has declined. Broader measures of productivity growth in China have also slowed since the late 2000’s.”
Favorable demographics are an integral part of the bull thesis for Indian equities.
“India in particular, but also Indonesia, Mexico, Turkey and Brazil are set to see continued robust growth in the working-age population in the next five years, bolstering GDP growth potential,” according to Fitch. “In contrast, in Russia, Poland, China and Korea headwinds from deteriorating demographics will sharpen and weigh on growth.”
Data points suggest local investors are rushing into Indian stocks. Additionally, the government is pushing various pension plans in the country to increase exposure to equities.
India is Asia’s third-largest economy behind China and Japan. There are a dozen dedicated India ETFs trading in the U.S., the three largest of which have a combined $8.5 billion in assets under management.
More aggressive investors who are confident about India may even look to a leveraged bullish play on Indian markets. The Direxion Daily India Bull 3X Shares (NYSEArca: INDL), which takes the 3x or 300% daily performance of Indian stocks.
For more information on Indian markets, visit our India category.