With 2024 soon arriving, optimism could be reborn that broader gauges of emerging market stocks could finally outperform domestic rivals. Betting on that happening is easier said than done. That’s particularly so when considering the MSCI Emerging Markets Index’s now lengthy losing streak against the S&P 500. Currently, major global banks have tepid forecasts for that benchmark in 2024, forecasting single-digit gains. But there will be pockets of opportunity for potentially greater upside. India could again be one of those destinations.
Like the U.S., India holds national elections next year. Some market observers believe that could lead to an uptick in volatility in the country’s financial markets. But the prevailing wisdom is that funds such as the VanEck India Growth Leaders ETF (GLIN) could still deliver upside.
India Could Again Be EM Leader
For wary emerging market investors, India has been a breath of fresh air in recent years. Underscoring the potential potency of GLIN in 2024, the ETF is higher by 40.1% over the past three years. That beat the MSCI India Index 770 basis points over that span. During that period, the MSCI Emerging Markets Index slumped 15.3%.
“EM equities behave as an asset class requiring market timing skills for in and out – more tactical than strategic allocation and next year looks to be no different,” according to JPMorgan. Next year “might start bumpy for EM equities largely driven by a challenging global macro picture.”
When it comes to EM stocks, being tactical could be the way to go in 2024. That’s because traditional emerging markets benchmarks are heavily allocated to Chinese stocks, which have been drags on those indexes. Within those gauges, the upside accrued by India stocks hasn’t been enough to outweigh losses by Chinese counterparts, confirming country-specific funds such as GLIN have merit. India is one of three developing economies where stocks could deliver strong returns next year, according to JPMorgan.
“India should benefit from strong domestic participation and attractive risk-adjusted returns relative to developed markets, while Saudi Arabia may see positive earnings revisions from higher oil prices. Meanwhile, Mexico is likely to cash in on the near-shoring trend, with US manufacturers moving manufacturing closer to home,” reported Bloomberg.
At a time when India equities are viewed by some as richly valued, GLIN could be all the more pertinent to investors. That’s because its underlying index is designed to seek out growth names trading at attractive multiples.
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