Indian ETF Investment Guide: Exploring Growth Opportunities in the Indian Economy
03-26 17:03uSMART

India's Economic Potential

Since emerging from the pandemic in 2022, India's economy has returned to a trajectory of rapid growth. As an economy primarily driven by domestic demand, amidst a backdrop of sluggish global trade, India boasted the world's highest economic growth rate in 2023, nearly double the average of emerging markets. This stellar economic performance also translated into a commendable showing in India's capital markets in 2023. Looking ahead to 2024, India's macroeconomic resilience is expected to persist. Prior to the May 2024 elections, government transfers and fiscal spending are anticipated to continue propelling economic growth. Following the elections, with improving economic conditions and the onset of a global interest rate reduction cycle, India's credit growth and capital expenditures are poised to maintain a robust pace, while private sector spending will further support India's economic performance.


Economic Growth Rates of Major World Economies

Source: Bloomberg


  1. Demographic Dividend :   

In the fourth quarter of 2023, India's GDP grew by 8.4% year-on-year, far exceeding the market's expected 6.6%. Concurrently with the sustained rapid population growth, India's per capita GDP continues to rise. From 1960 to 2022, India's per capita GDP averaged an annual growth rate of 5.57%, higher than the United States' 5.36%. Moreover, the current base is still relatively low, leaving ample room for imagination. Additionally, India's population structure is continuously trending towards a younger age. In 2023, the median age of India's population was 28 years old, indicating a relatively youthful population structure that supports economic growth. The youthful demographic structure is a long-term dividend for the Indian economy and stock market.

  1. Urbanization Process :  

As of 2022, India's urbanization rate was only 35.9%, still at an extremely low level. According to international experience, the average urbanization rate for medium to upper-middle-income countries is 66%, and for high-income countries, it is 81%. India still has vast room for growth in urbanization. The process of urbanization in India will bring about significant basic expenditure on real estate and infrastructure construction, which will provide momentum for India's future economic growth.

  1. Third Industry Strategy Attracts Significant Inflow of Foreign Investment :  

India has attracted a substantial inflow of foreign direct investment (FDI) through its outsourcing services. While the manufacturing industry is not yet mature, a large number of high-market-value service industry enterprises are sufficient to support the upward trend of the stock market. The influx of foreign capital has made India's stock market funds more abundant, increased the activity of stock market trading, improved the liquidity of stocks, and stimulated the prosperity of the stock market.

  1. Benign Entry and Exit System :  

India's stock market ensures the quality of companies in the market through strict listing and delisting regulations. If listed companies fail to meet regulatory requirements, they will be delisted, and their executives, founders, and affiliated companies will not be allowed to re-enter the securities market or relist for the next 10 years. This robust regulation compels listed companies to constantly "introspect," while also purifying the market environment.


Current State of the Indian Stock Market

As of early 2024, the Indian stock market has shown strong performance, with its market capitalization reaching $4.33 trillion, surpassing Hong Kong to become the world's fourth-largest stock market. This growth is mainly attributed to India's rapid economic expansion and the continuous upward trend of the Indian stock market in recent years. Additionally, the prosperity of the Indian stock market has been further fueled by the rapid increase in the number of domestic retail investors and the strong profitability of Indian companies. In 2023, the market capitalization of the Indian stock market surpassed the $4 trillion mark for the first time, with approximately half of this market value being achieved in the past four years.

If you are optimistic about the future development of India and wish to participate in this process but find it inconvenient to directly open an account in India, you can directly invest in Indian ETFs listed on the US stock market. So, which Indian ETFs are available for investment?


Recommendations for Indian ETF Investments:

  1. iShares MSCI India ETF (INDA.US): 

Closely tracks the MSCI India Index, primarily covering the performance of large and mid-cap companies listed on the Indian stock exchange.

  1. WisdomTree India Earnings ETF (EPI.US): 

Tracks the actual profit situation of Indian companies, with a special emphasis on the importance of profitability.

  1. Invesco India ETF (PIN.US): 

Tracks companies listed on the Indian stock exchange with high-quality characteristics, focusing on the financial health and profitability of companies.

  1. iShares MSCI India Small-Cap ETF (SMIN.US): 

Tracks small-cap companies in India, with potential for high risk and high returns, and strong growth prospects.

  1. Direxion Daily MSCI India Bull 2X Shares ETF (INDL.US): 

Tracks the condition of high-quality, large-cap companies in the Indian stock market.

  1. Direxion Daily MSCI India Bull 2X Shares ETF (INDL.US): 

A leveraged product that doubles the returns of the Indian index, known for its high leverage attributes.


Advantages of Investing in Indian ETFs

  1. Growth Potential of the Indian Economy: 

India, as one of the world's largest democratic countries, possesses a vast demographic dividend and a growing middle class. The Indian economy has maintained robust growth in recent years and is expected to continue growing at a rapid pace in the future. This growth potential provides long-term investment opportunities for Indian ETFs.

  1. Diversified Investment Targets: 

Indian ETFs typically include stocks from various industries and sectors of the Indian stock market, covering a diverse range of investment targets. Investors can gain broad exposure to the overall Indian economy by purchasing Indian ETFs, without needing to select individual stocks.

  1. Convenient Investment Method: 

Through Indian ETFs, investors can directly buy and sell Indian stocks on international markets without having to directly participate in the Indian securities market. This provides investors with a convenient and efficient investment method, saving them time and effort.

  1. Risk Diversification: 

Since Indian ETFs contain multiple stocks, investors can achieve risk diversification in their investment portfolios. This means that even if some stocks underperform, the overall impact on the investment portfolio will be reduced.

  1. Low Costs: 

Indian ETFs typically have lower management fees and transaction costs, allowing investors to obtain exposure to the Indian stock market at a lower cost.


How to Purchase Indian ETFs on uSMART

uSMART is a licensed securities broker in Singapore with over 500,000 users globally. For eligible users in Singapore, all stocks and ETFs listed on US exchanges are commission-free, with a fixed platform fee of $1 per transaction. This policy is effective starting from March 1, 2024, Singapore time. For more details, you can register an account and consult with a dedicated customer manager.

  1. Open the uSMART SG APP.
  2. Search for the ETF code you want to purchase, such as "INDA.US."
  3. Click on the trade option.
  4. Choose "Buy/Sell" to proceed with the transaction.
  5. Unlock the transaction to complete the purchase.

(This diagram is provided for illustrative purposes exclusively)



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We have based this article on our internal research and information available to the public from sources we believe to be reliable. While we have taken all reasonable care in preparing this article, we do not represent the information contained in this article is accurate or complete and we accept no responsibility for errors of fact or for any opinion expressed in this article. Opinions, projections and estimates reflect our assessments as of the article date and are subject to change. We have no obligation to notify you or anyone of any such change. You must make your own independent judgment with respect to any matter contained in this article. Neither we or our respective directors, officers or employees will be responsible for any losses or damages which any person may suffer or incur as a result of relying upon anything stated or omitted from this article.

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The value of these securities and the income from them may fall or rise. Your investment is subject to investment risk, including loss of income and capital invested. Past performance figures as well as any projection or forecast used in this article is not indicative of its future performance.

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