India ETFs Beat S&P 500: More Upside In the Cards?

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India’s stock market has outperformed the S&P 500 this year.  iShares India 50 ETF INDY (up 1.1%) beat the S&P 500 (down 5.8%) past month. The fund INDY is down 5.1% this year while the S&P 500 has lost 18.7%.

The Indian economy expanded 13.5% year over year in the second quarter of 2022, the maximum in a year but less than market forecasts of 15.2%. Though many rating agencies have cut India’s GDP growth forecasts recently, India is still in the strong growth territory. India Ratings became the latest agency to slash its FY23 gross domestic product forecast.

The ratings agency cut the forecast to 6.9% from 7%, joining other institutions who have lowered their projections to below 7% since the release of the April-June quarter GDP data. With the festive and wedding seasons in India approaching, activities in the economy should gain.

India’s economic performance has proved to be better than its peers, as the growth recovery has been robust while inflation has increased by much less than in other economies, per Barclays. Barclays predicts an annual growth of at least 6.0-6.5% year-over-year can be generated over the next two years as underlying demand seems strong, as households and corporates are benefiting from countercyclical fiscal tools, such as tax cuts and subsidies, per Barclays, as quoted on ET Now.

The United States, U.K. and Europe may witness recession this year. Goldman Sachs expects GDP growth of 1.1% next year, down from its prior projection of 1.5% growth from the fourth quarter of 2022 to the end of 2023, as quoted on Economic Times.

According to a report by India’s ministry of finance, the country hauled in $17.3 billion in foreign direct investment in the first quarter, which placed the country ahead of emerging market peers Indonesia and Argentina, but behind countries including Brazil and Mexico, as quoted on CNBC.

India imports 80% of its energy requirement. Hence, movement of oil price is pretty important in assessing Indian economy’s health. The Brent crude oil spot price is forecast averages $98 per barrel (b) in the fourth quarter of 2022 (4Q22) and $97/b in 2023, per EIA. India has already survived about $120/b this year. So, we expect the economy to navigate through the likely volatility in the oil market.

Against this backdrop, below we highlight a few India ETFs that have been in high momentum in the past one month.

ETFs in Focus

iShares MSCI India Small-Cap ETF SMIN – Up 2.6%

WisdomTree India Earnings Fund EPI – Up 0.15%

Nifty India Financials ETF INDF – Down 0.6%

First Trust India NIFTY 50 Equal Weight ETF NFTY – Down 0.7%

Columbia India Consumer ETF INCO – Down 1%

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WisdomTree India Earnings ETF (EPI): ETF Research Reports
 
iShares India 50 ETF (INDY): ETF Research Reports
 
Nifty India Financials ETF (INDF): ETF Research Reports
 
iShares MSCI India SmallCap ETF (SMIN): ETF Research Reports
 
Columbia India Consumer ETF (INCO): ETF Research Reports
 
First Trust India NIFTY 50 Equal Weight ETF (NFTY): ETF Research Reports
 
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