The year 2024 might get remembered for how U.S. stocks, precious metals and long-term government bonds rewarded patient investors. On top of that, global equities have done well overall. But the India stock market, the hottest market right now, has continued to outperform them all.
That said, the India stock market has limited opportunities for American investors who cannot access companies that trade exclusively on the Mumbai and Delhi stock exchanges. Yet investors can still build a solid portfolio by using a selection of exchange traded funds. Some of these ETFs are currently flashing buy signals.
Looking at performance since exactly one year ago, the Wisdom Tree India Earnings exchange traded fund has rallied 38.8% through Wednesday's close. This compares favorably with the SPDR S&P 500 ETF Trust, up 27.6% over the same 12-month period. The SPDR Gold Fund is up 32.1%.
Elsewhere, the Nikkei 225, a key benchmark for Japanese blue chip stocks, has also done admirably. Yet its 20.2% gain lies in the shadow of India's elephantine upward march.
India Stock Market: The Hottest Big Market Now
The Wisdom Tree India fund, one way to play the India stock market, has been forming a flat base. In any finely built base, a great stock or ETF essentially is taking a break after going on a marvelous run. And the ETF is no exception. Prior to its July 16 peak at 50.23, the fund had already risen 22.5% since the start of January.
In a flat base, the typical buy point arises when a stock or ETF advances past the base's prior high. In this case, Wisdom Tree India Earnings is getting closer to its buy point of 50.23.
However, this ETF arguably delivered a follow-on entry point with its rebound off the fast-rising 10-week moving average last week near 49.
On Thursday, EPI eased 0.5%, poised to halt a five-day winning streak.
The Sensex, a widely followed barometer for the Indian stock market, closed on Aug. 21 at 81,053, up 24.3% over the past 12 months.
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An Excellent Risk-Reward Entry
During a rebound off the 10-week line, it's best to buy with discipline. That is, do not chase a stock or ETF if it's already up more than 5% above this critical moving average. The India ETF is in that buy zone to about 51.50.
Wisdom Tree India Earnings is not alone in representing the India stock market.
The iShares MSCI India exchange traded fund has ascended 27.6% over the past 12 months. In contrast, the Dow Jones Industrial Average is up 18.7%. The iShares family has another India-focused fund that's doing even better. The iShares MSCI India Small Cap ETF has gushed 37.1% higher since Aug. 21, 2023.
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India Vs. China
Remember back in the early to mid-2000s, after the tech bear market officially ended in March 2023? Chinese equities rallied furiously, and the U.S. stock market hosted many of its best companies. Back then, internet and online video gaming plays Baidu, NetEase, Sohu, and Tencent adroitly represented the hottest market at the time.
Times have changed. Chinese equities are still in bear-market territory. Just look at the dismal performance of ETFs such as iShares China Large Cap, up a measly 0.5% over the past 12 months. The much more volatile Xtrackers Harvest CSI 300 fund, which includes smaller, tech-focused companies, has given long-term holders a true roller coaster of a ride since going public in November 2013. The fund has dropped 9.7% since Aug. 21, 2023.
India's stable democracy, youthful population, growing entrepreneurship, and healthy trade with countries all around the world appear to be positive factors boosting the country's stock market.
GDP Estimates: India Glows
According to estimates from Economist Intelligence Unit, the research arm of the Economist magazine, forecasters think India will grow its gross domestic product by a whopping 6.9% this year. GDP expanded 7.8% vs. a year earlier in the first quarter. The 2024 estimate compares favorably with other fast-growing Asian and Pacific Rim economies, including Indonesia (2024 GDP estimate of 3.5%), Philippines (5.4%), Malaysia (4.4%) and Australia (1.7%).
Swagato Ghosh, portfolio manager for Matthews India Fund (MINDX), wrote in an Aug. 9 post that newly reelected Prime Minister Narendra Modi has perhaps eased fears among investors over his ruling Bharatiya Janata Party's long-term growth strategy under a new coalition government.
The coalition "announced measures to boost consumption in the form of reduced direct tax at the lower end of income-related groups and a cut in gold import duty (from 15% to 6%). It didn't go overboard, in our view," Ghosh wrote. "There were no direct handouts, and spending toward rural programs remains unchanged from the interim budget."
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