Among the G7 countries, the U.S. economy and its inflation rate, for that matter, are impressive. But when factoring other large economies into the equation, India is the dominant force.
In what could bolster the outlook for ETFs such as the WisdomTree India Earnings Fund (EPI), India is likely to post one of the strongest, if not the strongest, GDP growth rate among the world’s major economies this year. That could support more gains for EPI. It’s higher by nearly 54% over the past three years. That’s a period in which the MSCI Emerging Markets Index lost 20.2%.
Obviously, 2024 is still in its early stages. But Indian stocks appear up to the task of beating the MSCI Emerging Markets Index this year. Year to date, EPI is up 6.7%. The broader basket of emerging markets equities is lower by half a percent.
India GDP Might Extend EPI Gains
It’s often said that a country’s stock market and broader economy aren’t always joined at the hip. However, there appear to be correlations between those two factors in India. That could be rewarding for EPI investors.
“At 8.4%, India’s economy expanded at its fastest pace in six quarters, data showed late Thursday, on strong private consumption and upbeat manufacturing and construction activity. Reuters estimates had pegged growth in the October to December period at 6.6%,” reported Shreyashi Sanyal for CNBC.
On the heels of India’s stellar GDP growth in the fourth quarter, some market observers believe the economy there will grow by 8% this year. In an interview with CNBC, Krishnamurthy Subramanian, executive director at the IMF, and former chief economic advisor of India, said the country’s economic growth is getting a lift from rising capital expenditures by the government.
That’s pertinent to investors considering EPI because the $2.67 billion ETF has about 39% of its weight to energy, materials, and industrial stocks. Those sectors could benefit from elevated government spending.
India’s GDP growth is important on another front. The country conducts national elections this year, and a strong economy could bolster Prime Minister Narendra Modi’s reelection bid. While controversial on some fronts, Modi’s pro-market and reform-minded policies have been applauded by global investors and are viewed as among the primary reasons for the strength displayed by Indian equities over the past several years. With tax collection rising and the economy growing, Modi could be poised to win another term, thus potentially dampening election year volatility in India’s financial markets.
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