Core Insights - The Nifty 50 Index has declined approximately 1.87% in early 2026 due to tariff concerns and foreign equity outflows [1] - Despite short-term volatility, India ETFs present a strong long-term growth opportunity, with the index up about 1.63% over the past six months and nearly 8.41% over the past year [2] Economic Outlook - India's economic outlook is optimistic, supported by favorable demographics, a growing base of young investors, increasing AI investments, advancements in chip design and digital infrastructure, and rapid digital transformation [3] - The OECD projects India's real GDP growth at 6.7% in 2025 and 6.2% in 2026, driven by resilient domestic demand and digitalization [6] Market Pressures - Uncertainty regarding U.S. tariffs poses a significant challenge, with tariffs on Indian goods reaching up to 50% and potential increases for nations purchasing Russian oil [4] - Foreign investors have sold $900 million in Indian shares in January 2026, following a record $19 billion in sales the previous year [5] Growth Projections - India's economy is expected to grow by 7.4% in the fiscal year ending in March, surpassing initial estimates of 6.3%–6.8% [7] - Private consumption, accounting for nearly 60% of GDP, is projected to grow by 7% year-on-year, while government spending is expected to increase by 5.2% [8] Investment Opportunities - Short-term challenges may increase market volatility, but India's long-term economic fundamentals remain strong, presenting investment opportunities [14] - Recommended India ETFs include iShares MSCI India ETF (INDA), WisdomTree India Earnings Fund (EPI), and Franklin FTSE India ETF (FLIN), with INDA being the largest at $9.58 billion in assets [15][16]

Core Insights - The WisdomTree India Earnings Fund (EPI) provides investors with exposure to India's rapidly growing economy while avoiding overvaluation of growth stocks that may not yield earnings [1][2] - EPI has $2.8 billion in assets and has achieved a 167% return over the past decade, but it underperformed with a 3% gain in the last year compared to the S&P 500's 17% increase [2][3] Fund Performance - EPI's performance in 2026 is heavily influenced by foreign portfolio investment flows, which have seen a record outflow of $18 billion from Indian equities in 2025, continuing with an additional $846 million in early 2026 [2][5] - The fund's top holdings include Reliance Industries (7.7%), HDFC Bank (6%), and ICICI Bank (5%), which are directly affected by foreign investment trends [5] Market Conditions - Foreign investors exited the Indian market due to high valuations, a weakening rupee (which fell 5% against the dollar), and concerns over potential U.S. tariffs on Indian exports [6] - The rupee's continued depreciation, trading around 90 per dollar, poses additional challenges for U.S. investors in EPI as it creates a double headwind when converting rupees back to dollars [6] Future Outlook - Monitoring monthly foreign portfolio investment data from India's National Securities Depository Limited is crucial; a return of net foreign buying, especially in the March quarter, could indicate renewed confidence in the market [7] - Potential catalysts for a reversal in foreign investment flows include progress on a U.S.-India trade deal, stabilization of the rupee, and evidence of strong corporate earnings growth linked to India's GDP growth, which is expected to exceed 7% for fiscal 2026 [7]

Core Insights - The U.S. is reportedly preparing to reduce tariffs on Indian imports from 50% to between 15% and 16%, contingent on India's commitment to decrease Russian oil purchases, which is generating optimism in the markets, particularly for India-focused ETFs [1][4] - The anticipated bilateral trade agreement is expected to be formalized at the upcoming ASEAN Summit, potentially alleviating trade tensions and significantly benefiting large-cap Indian equities and related ETFs [2][6] - The geopolitical dynamics, including the U.S. strategy to economically isolate Russia, are influencing the trade negotiations, which could lead to a positive impact on global trade and financial markets [3][5] Trade Agreement Implications - The trade deal is expected to enhance India's export sectors by providing tariff relief, particularly benefiting industries such as textiles, engineering goods, and pharmaceuticals [4][7] - The agreement is also part of the U.S. strategy to diversify energy alliances, especially in light of reduced agricultural imports from China, with India positioned as a potential new market for U.S. agricultural products [5][6] Investment Opportunities - The impending trade deal presents a significant opportunity for investors to increase their exposure to Indian markets through ETFs before prices rise post-announcement [7][8] - A shift in sentiment from trade conflict to strategic partnership is likely to attract Foreign Institutional Investor (FII) capital into India, making it an opportune time for long-term investors to accumulate India ETFs [8] India-focused ETFs Overview - iShares MSCI India ETF (INDA) has net assets of $9.58 billion and has gained 3.5% year to date, with fees of 62 basis points [10] - WisdomTree India Earnings Fund (EPI) has total assets of $2.9 million, up 2.1% year to date, with fees of 84 basis points [11][12] - Franklin FTSE India ETF (FLIN) has total assets of $2.53 billion, with a year-to-date increase of 3.3% and fees of 19 basis points [13] - The India Internet ETF (INQQ) has net assets of $63.4 million, also up 3.3% year to date, with fees of 86 basis points [14]