Is A Value-Oriented Emerging Markets Play Brewing in India?

There’s no question that Covid-19 has affected emerging markets economies regardless of where they rank on the GDP scale. Even one of the largest, India, isn’t immune to the effects of the pandemic, but it could present an opportunity for value-seeking investors.

Per a Business Standard report, India’s economy “may report a contraction of 16.5 percent in April-June quarter of FY21, as against a previously expected contraction of 20 percent, as degrowth in corporate GVA, courtesy better-than-expected results of some financial and non-financial companies, has been significantly better than revenue degrowth in Q1FY21, said economists at India’s largest public sector bank State Bank of India (SBI).”

“In May, we had indicated that the Q1FY21 GDP growth will exhibit a sharp decline at least in excess of 30 percent. However, the current situation warrants us to revisit our GDP growth… In principle, the revenue decline of listed companies has been far outstripped by cost rationalization thereby not impacting margins. As per our estimates, Q1FY21 real GDP degrowth would be now around –16.5 percent,” Soumya Kanti Ghosh, chief economic advisor for SBI wrote in his latest report Ecowrap, dated August 17.

Exchange-traded fund (ETF) investors sensing an opportunity in India can look at growth options like the VanEck Vectors India Growth Leaders ETF (GLIN). GLIN seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MarketGrader India All-Cap Growth Leaders Index.

The fund invests substantially all of its assets in the Subsidiary, a wholly-owned subsidiary located in the Republic of Mauritius. The index is comprised of equity securities which are generally considered by the index provider to exhibit favorable fundamental characteristics according to the index provider’s proprietary scoring methodology.

GLIN Chart

GLIN data by YCharts

Broad Market India-Focused ETFs

Investors looking broad-based exposure to India can use the iShares MSCI India ETF (CBOE: INDA). INDA seeks to track the investment results of the MSCI India Index composed of Indian equities, which measures the performance of equity securities of companies whose market capitalization, as calculated by the index provider, represents the top 85% of companies in the Indian securities market.

Short-term traders looking for leverage can use the Direxion Daily MSCI India Bull 3x ETF (NYSEArca: INDL). INDL seeks daily investment results equal to 300% of the daily performance of the MSCI India Index, which is designed to measure the performance of the large- and mid-capitalization segments of the Indian equity market, covering approximately 85% of the Indian equity universe.

For more information on India’s markets, visit our India category.