Futu Research | ETF Investment Research
[India ETF] Indian Stock Market Soars, India ETF Investment Recommendation for US Stocks
As one of the most vibrant emerging markets in the world, India has attracted international investors in recent years with the growth momentum of its capital markets. From a low in March 2020 to the end of 2023, the total market capitalization of the Indian stock market grew approximately twice, reaching $4 trillion in market capitalization.
inU.S. Stock MarketListed Indian ETFs provide a convenient channel for global investors to participate effectively and enjoy the dividends of India's rapid economic development.
1. Why is the Indian Stock Market “Like a Bamboo”?
(1) Indian Population Dividends and Economy Flowing
India's GDP for the fourth quarter of 2023 grew by 8.4% year-on-year, well above the 6.6% expected by the market. As the population continues to grow rapidly, the GDP per capita of India continues to increase. From 1960 to 2022, India's GDP per capita grew by 5.57% per annum, higher than the US's 5.36%, and the current base is still low, giving people plenty of room for imagination and development.
At the same time, India's population structure is also getting younger. India has a median age of 28 in 2023, supporting economic growth over a younger demographic. The rejuvenation of the population structure is the source of long-term dividends for the Indian economy and stock market.
(2) Third industry strategy to attract large inflow of foreign capital
India has attracted a large influx of foreign direct investment (FDI) in the form of outsourcing services. Although manufacturing is not well developed, a large number of high market value service companies have been sufficient to support the stock market's rise. The inflow of foreign capital increases the capital reserves of the Indian stock market, increases the activity of stock market trading, increases the liquidity of stocks and drives the stock market boom.
(3) Benign entry and exit system
The Indian stock market ensures the quality of the companies in the market through a strict listing and delisting system. Listed companies will be forced to exit the market if they fail to meet regulatory requirements, and their senior staff, founders and associated companies may no longer enter the securities market or re-list for the next 10 years. This powerful regulation encourages listed companies to be “self-confident” at the same time, while also purifying the market environment.
2. Indian ETF for the US Stock Market
So, if you look at the future development of India and want to participate in the process, and it is not convenient to open an account directly in India, we can participate directly in the Indian ETF in the US stock market. Here are the characteristics of this ETF:
$iShares MSCI India Index ETF(INDA.US)$: Closely tracks the MSCI India Index, which mainly covers the performance of medium or large companies listed on the Indian Stock Exchange.
$WisdomTree India Earnings ETF(EPI.US)$: Tracking the actual profitability of Indian businesses, highlighting the importance of profitability in particular.
$Invesco India ETF(PIN.US)$: Keep track of companies listed on the HDI with high quality characteristics, paying attention to their financial health and profitability.
$Ishares Msci India Small Cap Etf(SMIN.US)$: Tracking small Indian market-cap companies with potentially high risk and high returns, with strong growth.
$Franklin Templeton Etf Tr Franklin Ftse India Etf(FLIN.US)$: Track the performance of enterprises in the Indian stock market in the Chinese market.
$Direxion Daily MSCI India Bull 2X Shares ETF(INDL.US)$: Leveraged products with high leverage properties for printing up to twice the yield yield.
3. What are the risks of Indian ETF volatility in US stocks?
While the Indian market is full of opportunities, investors also need to face some challenges.
(1) Exchange rate risk
For example, fluctuations in the Indian rupee exchange rate may affect USD-valued ETFs: when Indian company stock prices rise, if the rupee depreciates significantly, the ETF's net value may still fall when converted to USD;
Changes in India-specific policy regulations, unstable economic data and sharp fluctuations in market sentiment may also lead to uncertainty;
(2) Precautions for Investing in Leveraged ETFs
The INDL in the above ETF provides a way to trade leveraged ETFs. A leveraged ETF is like a double-edged sword that magnifies investment returns in the short term, but long-term holdings can become a “gold digger.” The beneficial effects of leverage can automatically double or halve your money every day. If the market performs well for several days in a row, your money can grow as fast as a snowball.
However, when the market shows a drop, even a small pullback, the losses are multiplied by multiples as leverage reduces your existing amount by half and halves. For example, let's say you have $100 using a magic box that doubles your daily earnings. The market rose 10% on the first day, and your money turned to $120; the next day, the market fell 9.09%. Although the index returned to its starting point, your money was only $98.18 left. This is because losses are also multiplied.
At the same time, leverage incurs additional costs as it works, such as transaction fees, borrowing interest, etc., which slowly erode your capital in the dark. Therefore, leveraged ETFs are more suitable for investors who grasp market volatility accurately and are flexible in the short term, rather than for friends looking for solid, long-term returns. All in all, playing a leveraged ETF is like riding a flamingo, requiring great skill and caution, or you can incur unimaginable losses.
All in all, investing in India is like driving a vibrant but occasionally errant elephant. You need to be prepared to face political reversals like Indian cinema, while admiring the big drama of economic growth potential and hinting at the “impromptu scenario” of policy changes.
The threshold for foreign investment can be too low, like riding a roller coaster; a taxing environment is like playing a “treasure hunt”;
The legal system is diverse, but it also tests patience, dealing with disputes as well as resolving the delicate balance between curry and latte.
However, the rise of this land and the demand of the market are like bright fireworks, forcing countless heroes to compete against each other.
All in all, investing in India is a wonderful adventure that combines adventure and opportunity — investing in the US Stock India ETF is both to master the pulse of the Indian stock market and to be mindful of your preferences.
Carefully select ETFs with strategic advantages and risk-return characteristics, follow the pace of the market, dance to investment melodies, balance risk and opportunity, and navigate the financial route from Mumbai to Wall Street to the other side of long-term gains!
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