Barring a miracle of epic proportions over the last weeks of 2023, this year will go down as another dud for emerging markets equities. With the arrival of 2024 imminent, the MSCI Emerging Markets Index is up just 3.46% year-to-date. Predictably, some countries that are members of that benchmark are outperforming the gauge. For example, the MSCI India Index is higher by 7.12% this year.
Fortunately, there are plenty of U.S.-listed exchange traded funds that are outperforming the MSCI India Index. For example, the VanEck India Growth Leaders ETF (GLIN) is up 24.10% this year.
Obviously, there are no guarantees that Indian stocks and GLIN will extend gains next year. But it is worth noting the country’s equity market is in the midst of a multi-year run of handily outpacing broader emerging markets gauges. Further supporting the case for GLIN is that some professional investors are bullish on Indian stocks.
GDP Growth Supportive of GLIN
Already Asia’s third-largest economy, India is poised to continue climbing the ranks of the world’s economic titans. Morgan Stanley expects the country will post GDP growth of 11% in 2024 and 2025.
That buoyant doesn’t come without risks. Currently, Indian stocks are pricy, though they’ve delivered the goods to merit those lofty valuations. That implies that if GDP growth there slows, stocks, including GLIN holdings could be vulnerable. Another point for GLIN is that India will hold national elections late next year. The status quo would be the preferred outcome, but political volatility should always be on emerging markets investors’ radars.
GLIN, which turned 13 years old in August, is home to 83 stocks. Perhaps surprisingly, some GLIN components may not be as stretched on valuation as the broader Indian equity market.
“We find decent value in a few large-cap stocks and BFSI (banking, financial services, and insurance) sector only in light of rich valuations of most stocks in the consumption, investment, and outsourcing sectors,” according to a recent report by Kotak Securities. “As the broader market valuations are rich, opportunities arising from [a] market correction can be used to add quality stocks (with attractive valuations) from a long-term investment perspective.”
Technology (outsourcing), financial services, and the two consumer sectors combine for about 58% of the GLIN portfolio, according to issuer data.
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