Stars Aligning for India Investment Case | ETF Trends

Over the past several years, Indian equities have cemented themselves as the stars among large emerging markets. During that time, the MSCI India Index returned nearly 46.6%, trailing the S&P 500 by a negligible margin while being surprisingly less volatile.

For a more apples-to-apples comparison, the last 36 months saw the MSCI India Index obliterate its China counterpart as well as the MSCI Emerging Markets Index. However, that’s also a reminder that when considering India exchange traded funds, advisors and investors should perform adequate due diligence. Consider the case of the WisdomTree India Earnings Fund (EPI).

EPI, which is one of the oldest and largest India ETFs, is higher by a stellar 75.6% over the past three years — a massive advantage of 2,900 basis points over the aforementioned MSCI gauge. That makes the WisdomTree ETF one of the leading performers in this category over that period. Of course, past performance isn’t a guarantee of future returns, but the long-term outlook is increasingly compelling for EPI and its brethren.

Good Reasons to Evaluate EPI and India Investment

The India investment thesis is supported by attractive demographics, including a young, growing population. In fact, it’s possible that India could surpass China as the world’s most populous nation as soon as this year.

“India has a young and growing population with a median age of just under 29 years, a large and growing middle class, and a rapidly expanding skilled workforce,” according to WisdomTree research. “It also has the largest English-speaking population after the U.S., making it the preferred destination for outsourced manufacturing and services. In addition to this, the nation’s progress in enhancing literacy levels and education standards has positioned India as an emerging powerhouse of the world.”

Another benefit tied to Indian stocks is that the current regime there is pro-business and is making domestic investments to bolster its manufacturing and to modernize long-ailing infrastructure. Like the U.S., India is putting its money where its mouth is on the infrastructure front, and that could be a long-term positive for EPI. EPI’s infrastructure ties are clear, as the ETF allocates about 48% of its weight to the materials, energy, and industrial sectors.

“Under the National Infrastructure Pipeline (NIP) initiative, 2,476 projects are under development, at an estimated investment of $1.9 trillion. Nearly half of the under-development projects are in the transportation sector, and 3,906 are in the roads and bridges sub-sector,” added WisdomTree. “Additionally, India’s logistics market is expected to reach $556.97 billion by 2027, growing at a compound annual growth rate of 6.28%.”

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