India ETFs have been riding high lately and hovering around a 52-week high.
First Trust India Nifty 50 Equal Weight ETF ( NFTY Quick Quote NFTY - Free Report) is up about 17% this year, while iShares MSCI India ETF ( INDA Quick Quote INDA - Free Report) has advanced about 11.8%. India’s stocks have advanced lately, thanks to dovish commentary from a U.S. Federal Reserve official that boosted bets of rate cuts by as early as March 2024.
But apart from Fed hopes, Bharatiya Janata Party's election win should also boost the India market in the near term. Let’s delve a little deeper.
BJP’s State Election Win
India’s stock markets have experienced a significant surge this month following the Bharatiya Janata Party's (BJP) victory in three out of four major state elections. This electoral success has been met with positive reactions in the equity markets, with 27 out of the 30 Sensex constituents closing higher. The National Stock Exchange's Nifty index reached a new all-time high.
Analysts attribute this bullish trend in the stock market to growing optimism among investors about the BJP's potential for a third term in the 2024 Lok Sabha elections. This sentiment has particularly benefited sectors such as
railways and defense, which have seen a notable surge in their stock values. The general consensus among market analysts is that the BJP's apparent victory in key states is likely to further boost investor confidence, thereby driving the market even higher as the 2024 general elections approach. Slower Fed Rate Hikes/Rate Cuts in 2024?
There is almost no chance of a Fed rate hike this year. There is an 84.8% chance of rates being the same in January and about 41.8% chance of rates remaining the same in March 2024, per CME FedWatch Tool. A decline in inflation has boosted the probability of a less-hawkish Fed. This would likely weaken the U.S. dollar and favor emerging market investing like India. Talks are rife that the Fed may even cut rates in the latter part of 2024.
Upbeat GDP Growth
India’s economy grew 7.6% year over year in the third quarter of 2023, following a strong 7.8% growth in the previous period and beating forecasts of a 6.8% rise. The reading is also higher than the Reserve Bank of India projection of 6.5%, per tradingeconomics.
In its Global Credit Outlook 2024, the S&P predicted 6.4% GDP growth in the fiscal year through March 2024 (2023-24) as compared to 7.2% in the previous financial year,
as quoted on Business Today. India is projected to become the world's third-largest economy by 2030, with an estimated 7% GDP growth in the fiscal year 2026-27, according to rating S&P Global Ratings. India ETFs in Focus
Against this backdrop, below, we highlight a few India ETFs that should be tapped in the near term.
iShares MSCI India Small-Cap ETF ( SMIN Quick Quote SMIN - Free Report) – Up 31.1% This Year VanEck India Growth Leaders ETF ( GLIN Quick Quote GLIN - Free Report) – Up 28.1% Columbia India Consumer ETF ( INCO Quick Quote INCO - Free Report) – Up 27.9% India Internet & Ecommerce ETF ( INQQ Quick Quote INQQ - Free Report) – Up 25.8% VanEck Digital India ETF ( DGIN Quick Quote DGIN - Free Report) – Up 24.4%