After underperforming in the year-to-date frame, India equities have bounced back in the past month
. iShares India 50 ETF ( INDY Quick Quote INDY - Free Report) is down 0.3% year to date but up 6.7% in the past month (as of Apr 8, 2022). In contrast, the S&P 500 is down 5.6% YTD and up 5.2% past month.
After a six-month long selling pressure, foreign investors have emerged as net buyers in April into India equities to play the cheap valuations. Investors should also not forget that India’s economy offers a great growth engine.
However, it is still slightly early to have conviction in a change in the trend with respect to FPI flows. After all, rates are likely to rise fast in the United States on a hawkish Fed. A rising rate scenario in the United States is a negative for the emerging market investing.
The investing trend in India may get better in the coming days due to improvement in global cues and budget outcome, which were largely supportive of the economy and market. The Reserve Bank of India projects the economic growth rate for 2022-23 at 7.2%.
The International Monetary Fund has set the growth forecast of one of the fastest-growing major economies at 7.9% for the fiscal year 2022-23. Fitch expects India’s GDP growth to be
8.5% for the financial year 2022-23.
Yes, coal shortages and high oil prices are headwinds as India imports about 80% of its fuel needs. But growing vaccination and increasing mobility should position India in a better spot than what we have seen in the previous Fed policy tightening cycles.
Against this backdrop, it could be intriguing to study India’s investing scenario on a sectoral basis. It is worth betting on sectors (especially in the light of the recent budget announcement) that hold promises. Nicely enough, sensing the need of the hour, ETF issuers have been launching ETFs on India’s sectors lately.
Below we highlight those.
Nifty India Financials ETF ( INDF Quick Quote INDF - Free Report)
Management of INDF pointed out that historically, the banking sector has grown faster than GDP. Although the momentum has slowed lately due to lack of corporate capex growth, the government is striving to boost the move by increasing its own spending on infrastructure. India’s financial sector has also announced a couple of big-ticket M&As in recent weeks.
Also, per research conducted by Bloomberg and Goldman Sachs Global Investment Research, banks in Nifty are projected to record 25% earnings per share growth in calendar-year 2022. Banks offer decent valuation too, with a near-term P/E ratio of 19.7X against 22.2X P/E offered by Nifty.
VanEck Digital India ETF ( DGIN Quick Quote DGIN - Free Report)
This fund is a new entrant that hit the market on Feb 15. Investors should note that this digital ETF could be a good bet as the launch of 5G auctions in 2022 will help boost the telco sector, which in turn, may benefit the fund DGIN too. Digital financial services are also on the rise. The latest budget is also focused on broadening the areas of such services.
The 35-stock fund DGIN puts 63.6% weight on Information Technology. Reliance Industries (8.51%), Infosys (7.98%) and Tata Consultancy Services (6.95%) take the top three positions in the fund.
India Internet and Ecommerce ETF ( INQQ Quick Quote INQQ - Free Report)
The most newly-launched fund in this space is INQQ, which offers targeted exposure to the companies leading India’s digitization. The fund will provide investors exposure to companies leading the rise of e-commerce and Internet innovation in every sphere of life in India.
Per the issuer, “India’s President Modi introduced the “Digital India” campaign in 2015 with the aim to have a trillion-dollar online economy by 2025 and improve the infrastructure needed to digitally empower the country.” This makes the fund a good bet for the long term.
Columbia India Consumer ETF ( INCO Quick Quote INCO - Free Report)
Consumer demand in India at current prices, when converted into dollars, is just 1% lower than its pre-pandemic level. With vaccinations and booster doses gaining traction, we expect the sector to gain more ground in the coming days.
This 31-stock ETF focuses on companies in India's growing consumer industry. Mahindra & Mahindra (5.48%), ITC (5.33%) and Bajaj Auto (5.23%) are the top three companies of the ETF INCO. Consumer Discretionary accounts for about 57.53% of the fund INCO while consumer staples makes up about 42.47% of the ETF.