Economic Overview - The Reserve Bank of India has cut the repo rate to 5.25%, indicating a supportive monetary policy environment [1] - India's GDP is projected to grow by approximately 6.7% for Fiscal Year 2026, reflecting strong economic expansion alongside stable prices [1] - The Consumer Price Index (CPI) for December 2025 was reported at 1.33%, significantly below the RBI's target of 4%, which is favorable for maintaining purchasing power [2] Investment Landscape - India is seen as a primary destination for investment due to its favorable economic conditions, characterized as a "Goldilocks phase" with high growth and low inflation [4] - Investors are shifting capital towards markets like India that offer political stability and controlled prices amidst volatility in Western markets [5] - Lower interest rates are expected to catalyze corporate expansion and profitability, particularly benefiting the financial sector [6][7] Market Strategy - U.S.-based investors can access Indian market growth through the iShares MSCI India ETF (BATS: INDA), which is heavily weighted towards the financial sector [8] - The ETF's performance is expected to benefit from increased loan demand as the economy grows and interest rates fall [9] - The "China Plus One" strategy is driving foreign direct investment into India, providing a long-term support for the ETF's price [10] Company Focus: HDFC Bank - HDFC Bank is a critical holding in the INDA ETF, accounting for over 8% of the fund, and its performance is vital for the ETF's overall success [11] - The bank has returned to an aggressive growth phase, with a recent Credit-Deposit (CD) ratio normalizing to 98.5%, indicating a healthier balance sheet [14] - HDFC Bank reported a 13% year-over-year increase in loan growth and an 11.5% increase in deposits, signaling a recovery from previous merger integration issues [21] Valuation Insights - HDFC Bank's recent IPO of its subsidiary, HDB Financial Services, adds tangible value to the parent company's books, enhancing its market capitalization [16][17] - This structural valuation support may be underappreciated by the market, providing a margin of safety for investors [15] Strategic Diversification - The divergence between India's stable growth narrative and the uncertainty in Western markets presents a compelling investment opportunity [18] - The combination of the INDA ETF and HDFC Bank's growth potential offers a data-backed strategy for investors looking to diversify away from U.S. political risks [20]