India on Precipice of Epic Digital Disruption | ETF Trends

When it comes to the largest investable internet and technology markets, the U.S. and China garner most of the acclaim. However, there may be a new sheriff in town in the form of India. As a prime destination for financial services and tech outsourcing, India has long had roots in digitization and tech.

More recently, the related investment thesis has gained momentum while becoming more accessible to U.S. investors thanks to exchange traded funds such as the VanEck Digital India ETF (DGIN). In fact, DGIN is potentially the most viable U.S.-listed ETF when it comes to accessing India’s evolving tech scene. Why? Because it is dedicated to that theme. That’s worth remembering at a time when a variety of India ETFs are rallying, but many are doing so with limited contributions from digitization-related names.

DGIN is already strutting its stuff. Over the past year, the VanEck ETF is up 33.07%, beating the MSCI India Index by more than 570 basis points. Importantly, DGIN, which holds 44 large- and mid-cap stocks, hits the important corners of the India long-term growth thesis as tech, communication services, financial services, and consumer cyclical stocks combine for about 87% of the fund’s roster.

DGIN: 5G, Financials and More

As noted above, DGIN possesses the sector exposures necessary to capitalize on the growthier side of the India investment story. Those exposures parlay into relevant thematic exposures, too, including India’s burgeoning status as a major 5G and smartphone market.

With over 158 million 5G smartphones in circulation and a projected 40% expansion by 2026, India’s mobile market is poised for exponential growth,” noted Sunny Bokhari, VanEck associate product manager. “This unprecedented connectivity is bridging the digital divide, introducing individuals to a world of digital applications and services. As smartphone penetration deepens, mobile-based solutions enabled by India Stack are becoming increasingly ubiquitous, driving financial inclusion and economic participation.”

Speaking of financial inclusion, technology purveyed by Indian companies, including some DGIN member firms, is making it easier and cheaper for more Indian citizens to access traditional banking services. That’s making some less affluent customers more appealing to banks there while boosting the case for the country’s fintech prospects.

“Banking access paired with UPI has revolutionized digital payments, making transactions quick, secure, and available to all, regardless of location or socioeconomic status. Some of the 3rd party digital payments apps benefitting from increased adoption of UPI include One Communications Ltd. (a DGIN holding),” added Bokhari.

Fintech evolution also supports the case for e-commerce expansion. Shopping online is already old hat to Indian consumers because the country doesn’t have Western-style brick-and-mortar retail infrastructure. That says as digitization and fintech evolve, so will India’s e-commerce landscape.

“With over 800 million users, India is the 2nd largest internet market in the world and e-commerce is expected to grow at 19.6% CAGR by 2030,” concluded Bokhari. “Companies (including some DGIN holdings) at the center of this digitization of marketplaces in India are benefitting.”

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