U.S. investors are beset by ongoing government logjams, expensive stocks, concentration risk, and an interminable Fed fight vs. inflation. So it’s no surprise investors are looking abroad. Emerging markets strategies have picked up notable interest from investors, with the above just some of the reasons why. One nation seeing a lot of that interest, India, presents a very strong case for investment. The India investing case also sports two ETFs with slightly different routes and allocations to India and emerging markets.
What’s behind the case for India investing right now? Even with global headwinds like broadly high interest rates, geopolitics, and somewhat sluggish consumer demand, India looks bright. The World Bank still forecasts 6.3% GDP growth for the country for fiscal year 2023-2024, with service sector activity and investment growth up 7.4% and 8.9%, respectively.
See more: “Stars Aligning for India Investment Case“
India can tout both a burgeoning middle class and an existing, strong exporting base. The source of many of the world’s generic pharmaceuticals, for example, India also of course hosts one of the world’s biggest “other” auto firms, Tata Motors (TATAMOTORS). With the country also seeing nearly $2 trillion in infrastructure projects coming, with about half focused on transportation, its logistics potential also looks quite positive.
How, then, should interested investors play India investing? While there aren’t too many ETFs focused on the space, WisdomTree offers a pair of strategies that do so. The WisdomTree India Earnings Fund (EPI) and the WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE) present different routes to gain this exposure.
EPI focuses on India alone, tracking the WisdomTree India Earnings Index for an 84 basis point (bps) fee. Whereas many other India ETFs offer cap-weighted approaches, EPI’s index weights firms by earnings. The fund has returned 12.1% YTD, outperforming both its ETF Database Category and FactSet Segment averages.
Meanwhile, XSOE doesn’t include India as its No. 1 market – rather, its holdings are weighted second. However, India equities play a big role in the overall ETF. Its focus on firms free of state ownership, while also diversifying pretty broadly in Asia, gives investors a chance to dip their toes into India firms for a 32 bps fee.
India investing could present an intriguing option amid domestic uncertainty. For investors looking at two ways into India equities, EPI and XSOE may be worth keeping an eye on.
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