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The introduction of India government’s bonds into two major global indexes is providing a significant boost to the rapidly expanding nation, making it poised to attract billions in inflows and opening doors for a wider range of investors.
After JPMorgan’s decision to include India’s bonds in the JPMorgan Government Bond Index-Emerging Markets, Bloomberg followed suit and announced the inclusion of the country’s government bonds to Bloomberg Index Services in early March 2024.
According to CNBC, Bloomberg announced the inclusion to take effect from 31 Jan, 2025. JPMorgan is set to add the country’s bonds to its index in June 2024, planning a gradual 10-month inclusion of Indian bonds, starting at 1% in June and reaching a maximum 10% weightage by April 2025.
Bond Inclusion to Drive Inflows
With analysts estimating that the inclusion could drive substantial inflow into the country’s rupee-denominated government debt, amounting to billions of dollars, the surge in demand is anticipated to push bond yields down, thereby bolstering the strength of the local currency.
According to Deepak Agrawal, chief investment officer of debt at Kotak Mutual Fund, as quoted on CNBC, following the inclusion, a consistent inflow of $25-30 billion over the next 12-18 months is estimated. Goldman Sachs anticipates inflows north of $40 billion from the announcement to the conclusion of the scale-in period or averaging $2 billion per month.
India's Growth Projections Take Flight
S&P Global revised India’s GDP growth forecasts upward by 40 bps, with the current growth rate standing at 6.8% for FY25, according to Business Standard.
In early March of 2024, Moody's Investor Service raised India's growth forecast to 6.8% from the previously stated 6.1%, per Reuters. According to the rating agency, India is anticipated to remain the fastest-growing country among the G-20 economies, with the recent upward revision driven by robust manufacturing and construction sectors.
Along with Moody’s projection of India positioning itself as the fastest-growing economy within the G-20, IMF executive director Krishnamurthy Subramanian estimates a similar trajectory for India’s economy. As quoted on CNBC, the surge in India's economic growth can be attributed to a strategic shift in government priorities toward bolstering capital expenditure.
According to Moody’s, strong goods and services tax collections, increasing auto sales, optimistic consumer sentiment and double-digit credit expansion indicate urban consumption resilience. Supply-chain diversification and favorable investor reaction to government programs supporting important industrial industries are estimated to provide relief to the slowing of private industrial capital spending.
Interest Rate Cuts to Boost India’s Economy
India's economy showcased remarkable growth, recording an 8.4% expansion in the fourth quarter of 2023, outpacing other major economies. With inflation levels still elevated, according to median forecasts by a Reuters poll, interest rates are expected to go down to 6.25% by the end of September 2024 from the current level of 6.5%. Rates are expected to curb by 50 bps by the end of this year, according to Reuters.
With the Federal Reserve adopting a dovish stance and estimates of interest rate cuts in 2024, foreign capital inflows into emerging markets like India are likely to receive a boost. As the outlook for India’s economy remains strong, rate cuts will boost foreign capital inflow, which can lead the market to new highs. (Read: ETFs in Focus With Fed Rate Cuts in the Cards)
Exploring India ETFs
Against this backdrop, below we have highlighted a few India ETFs for investors to capitalize on the country’s optimistic outlook.
iShares MSCI India ETF seeks to track the performance of the MSCI India Index with a basket of 136 securities. The fund has amassed an asset base of $8.89 billion and charges an annual fee of 0.65%.
iShares MSCI India ETF has major exposure to financials (24.82%), followed by consumer discretionary (12.71%), information technology (11.93%) and energy (11.12%) sectors. The fund has gained 31.68% over the past year and 11.46% over the past three months.
WisdomTree India Earnings Fund seeks to track the performance of the WisdomTree India Earnings Index with a basket of 476 securities. The fund has gathered an asset base of $2.81 billion and charges an annual fee of 0.85%.
WisdomTree India Earnings Fund has major exposure to financials (22.62%), followed by the energy (18.25%), materials (12.53%) and information technology (11.88%) sectors. The fund has gained 40.22% over the past year and 14.59% over the past three months.
iShares India 50 ETF seeks to track the performance of the Nifty 50 Index with a basket of 50 securities. The fund has gathered an asset base of $854.5 million and charges an annual fee of 0.89%.
iShares India 50 ETF has major exposure to financials (32.84%), followed by information technology (13.27%), energy (12.78%) and consumer discretionary (9.01%) sectors. The fund has gained 22.99% over the past year and 8.24% over the past three months.
Franklin FTSE India ETF seeks to track the performance of the FTSE India Capped Index with a basket of 228 securities. The fund has amassed an asset base of $864.6 million and charges an annual fee of 0.19%.
Franklin FTSE India ETF has major exposure to finance (24.08%), followed by the technology services (11.86%), energy minerals (10.96%) and consumer durables (8.03%) sectors. The fund has gained 34.60% over the past year and 12.07% over the past three months.
iShares MSCI India Small-Cap ETF seeks to track the performance of the MSCI India Small Cap Index with a basket of 490 securities. The fund has gathered an asset base of $726 million and charges an annual fee of 0.79%.
iShares MSCI India Small-Cap ETFhas major exposure to industrials (22.01s%), followed by the financials (17.36%), materials (14.87%) and consumer discretionary (13.98%) sectors. The fund has gained 45.22% over the past year and 9.03% over the past three months.
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Embrace ETFs to Capture India's Momentum Growth
The introduction of India government’s bonds into two major global indexes is providing a significant boost to the rapidly expanding nation, making it poised to attract billions in inflows and opening doors for a wider range of investors.
After JPMorgan’s decision to include India’s bonds in the JPMorgan Government Bond Index-Emerging Markets, Bloomberg followed suit and announced the inclusion of the country’s government bonds to Bloomberg Index Services in early March 2024.
According to CNBC, Bloomberg announced the inclusion to take effect from 31 Jan, 2025. JPMorgan is set to add the country’s bonds to its index in June 2024, planning a gradual 10-month inclusion of Indian bonds, starting at 1% in June and reaching a maximum 10% weightage by April 2025.
Bond Inclusion to Drive Inflows
With analysts estimating that the inclusion could drive substantial inflow into the country’s rupee-denominated government debt, amounting to billions of dollars, the surge in demand is anticipated to push bond yields down, thereby bolstering the strength of the local currency.
According to Deepak Agrawal, chief investment officer of debt at Kotak Mutual Fund, as quoted on CNBC, following the inclusion, a consistent inflow of $25-30 billion over the next 12-18 months is estimated. Goldman Sachs anticipates inflows north of $40 billion from the announcement to the conclusion of the scale-in period or averaging $2 billion per month.
India's Growth Projections Take Flight
S&P Global revised India’s GDP growth forecasts upward by 40 bps, with the current growth rate standing at 6.8% for FY25, according to Business Standard.
In early March of 2024, Moody's Investor Service raised India's growth forecast to 6.8% from the previously stated 6.1%, per Reuters. According to the rating agency, India is anticipated to remain the fastest-growing country among the G-20 economies, with the recent upward revision driven by robust manufacturing and construction sectors.
Along with Moody’s projection of India positioning itself as the fastest-growing economy within the G-20, IMF executive director Krishnamurthy Subramanian estimates a similar trajectory for India’s economy. As quoted on CNBC, the surge in India's economic growth can be attributed to a strategic shift in government priorities toward bolstering capital expenditure.
According to Moody’s, strong goods and services tax collections, increasing auto sales, optimistic consumer sentiment and double-digit credit expansion indicate urban consumption resilience. Supply-chain diversification and favorable investor reaction to government programs supporting important industrial industries are estimated to provide relief to the slowing of private industrial capital spending.
Interest Rate Cuts to Boost India’s Economy
India's economy showcased remarkable growth, recording an 8.4% expansion in the fourth quarter of 2023, outpacing other major economies. With inflation levels still elevated, according to median forecasts by a Reuters poll, interest rates are expected to go down to 6.25% by the end of September 2024 from the current level of 6.5%. Rates are expected to curb by 50 bps by the end of this year, according to Reuters.
With the Federal Reserve adopting a dovish stance and estimates of interest rate cuts in 2024, foreign capital inflows into emerging markets like India are likely to receive a boost. As the outlook for India’s economy remains strong, rate cuts will boost foreign capital inflow, which can lead the market to new highs. (Read: ETFs in Focus With Fed Rate Cuts in the Cards)
Exploring India ETFs
Against this backdrop, below we have highlighted a few India ETFs for investors to capitalize on the country’s optimistic outlook.
iShares MSCI India ETF (INDA - Free Report)
iShares MSCI India ETF seeks to track the performance of the MSCI India Index with a basket of 136 securities. The fund has amassed an asset base of $8.89 billion and charges an annual fee of 0.65%.
iShares MSCI India ETF has major exposure to financials (24.82%), followed by consumer discretionary (12.71%), information technology (11.93%) and energy (11.12%) sectors. The fund has gained 31.68% over the past year and 11.46% over the past three months.
WisdomTree India Earnings Fund (EPI - Free Report)
WisdomTree India Earnings Fund seeks to track the performance of the WisdomTree India Earnings Index with a basket of 476 securities. The fund has gathered an asset base of $2.81 billion and charges an annual fee of 0.85%.
WisdomTree India Earnings Fund has major exposure to financials (22.62%), followed by the energy (18.25%), materials (12.53%) and information technology (11.88%) sectors. The fund has gained 40.22% over the past year and 14.59% over the past three months.
iShares India 50 ETF (INDY - Free Report)
iShares India 50 ETF seeks to track the performance of the Nifty 50 Index with a basket of 50 securities. The fund has gathered an asset base of $854.5 million and charges an annual fee of 0.89%.
iShares India 50 ETF has major exposure to financials (32.84%), followed by information technology (13.27%), energy (12.78%) and consumer discretionary (9.01%) sectors. The fund has gained 22.99% over the past year and 8.24% over the past three months.
Franklin FTSE India ETF (FLIN - Free Report)
Franklin FTSE India ETF seeks to track the performance of the FTSE India Capped Index with a basket of 228 securities. The fund has amassed an asset base of $864.6 million and charges an annual fee of 0.19%.
Franklin FTSE India ETF has major exposure to finance (24.08%), followed by the technology services (11.86%), energy minerals (10.96%) and consumer durables (8.03%) sectors. The fund has gained 34.60% over the past year and 12.07% over the past three months.
iShares MSCI India Small-Cap ETF (SMIN - Free Report)
iShares MSCI India Small-Cap ETF seeks to track the performance of the MSCI India Small Cap Index with a basket of 490 securities. The fund has gathered an asset base of $726 million and charges an annual fee of 0.79%.
iShares MSCI India Small-Cap ETFhas major exposure to industrials (22.01s%), followed by the financials (17.36%), materials (14.87%) and consumer discretionary (13.98%) sectors. The fund has gained 45.22% over the past year and 9.03% over the past three months.