Rise of India's Market Cap Share a Good Sign For This Invesco ETF

A rise in India’s share market capitalization could provide fodder for investors to consider single-country exchange traded funds (ETFs) such as the Invesco India ETF (PIN).

“India’s share market capitalization is expected to rise to $5 trillion by 2024 from the current $3.5 trillion, catapulting the nation to the world’s fifth-biggest market, according to Goldman Sachs Group Inc,” noted a Bloomberg article published in Yahoo Finance.

“Nearly $400 billion of market capitalization could be added from new IPOs over the next 2-3 years, Goldman Sachs analysts led by Sunil Koul, wrote in a note,” the article added. “Share-sale pipeline is expected to remain robust over the next 12-24 months, based on recent announcements from ‘new economy’ unicorns, analysts wrote.”

Investors looking for an alternate play on growth-oriented countries may want to look at India. It’s an attractive prospect, especially if other options like China might be showing signs of hitting a growth peak.

“We stay overweight on expectations of a strong cyclical recovery and supportive flows,” according to the report. “Additionally, the strong thematic appeal and growth potential of the new economy sectors lend support to our medium-term constructive view.”

“Investors can find attractive return opportunities, as long as they don’t overpay for growth, as evidenced by significant outperformance of China new economy stocks over the past decade,” the report said.

The fund seeks to track the investment results (before fees and expenses) of the FTSE India Quality and Yield Select Index (the “underlying index”). The fund seeks to achieve its investment objective by investing at least 90% of its total assets in the securities that comprise the underlying index, as well as ADRs and GDRs that represent securities in the underlying index. The underlying index is a modified-market capitalization-weighted index of equity securities that are traded on the National Stock Exchange of India.

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Rising Interest From Investors

Foreign direct investment (FDI) will be a key driver for India’s strength. According to an Economic Times article, Deloitte CEO Punit Renjen said that a number of companies in the United States, the United Kingdom, and Japan are considering first-time investments in India.

The effects of the pandemic could be waning, and investors are ready to inject capital into the country. This should, in turn, give India-focused ETFs like PIN a boost.

“Despite the COVID-19 destruction, inflows hit a record high last year. Business leaders, whom Deloitte surveyed, are preparing to make additional and first-time investments in India,” said Renjen.

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