Core Viewpoint - The Indian equity market has experienced significant underperformance in 2023, with the Nifty 50 index only increasing by approximately 5% year to date, contrasting sharply with a 22% gain in the previous year and lagging behind many Asian markets that have surged over 30% [1][2] Group 1: Causes of Underperformance - Disappointing corporate earnings growth, subdued domestic consumption, and adverse tariff disputes, including new U.S. tariffs, have negatively impacted export-sensitive sectors and contributed to rupee depreciation [4] - Domestic political uncertainty, a slowdown in capital expenditure (capex), and a shift of global capital to safer markets have pressured Indian equities, with foreign investors estimated to have sold over $30 billion in Indian equities over the past year [5] - The Indian equity market's valuation remains high, trading at approximately 22.3 times forward earnings, about 20% above its long-term norm, which has raised concerns [5][6] Group 2: Positive Outlook - Goldman Sachs has upgraded the Indian equity market to "overweight" after 13 months of a "neutral" rating, citing supportive policy changes such as anticipated RBI rate cuts, liquidity easing, and reductions in the Goods and Services Tax (GST) [7] - Record equity purchases by Domestic Institutional Investors (DIIs) and steady retail Systematic Investment Plan (SIP) inflows have stabilized the market amid foreign portfolio investor (FPI) selling [8] - The end of a year-long cycle of earnings downgrades suggests a clear earnings rebound is expected, contributing to a bullish outlook [9] Group 3: Investment Opportunities - Several Indian ETFs are highlighted as potential investment opportunities, including: - **iShares MSCI India ETF (INDA)**: Net assets of $9.57 billion, top holdings include HDFC Bank (8.12%), Reliance Industries (6.59%), and ICICI Bank (5.18%), with a year-to-date gain of 4% [11][12] - **WisdomTree India Earnings Fund (EPI)**: Total assets of $2.85 million, top holdings include Reliance Industries (7.49%), HDFC Bank (6.17%), and ICICI Bank (5.26%), with a year-to-date gain of 3.1% [13] - **iShares India 50 ETF (INDY)**: Total assets of $690.23 million, top holdings include HDFC Bank (12.73%), Reliance Industries (8.53%), and ICICI Bank (8.14%), with a year-to-date gain of 5.2% [14] - **Franklin FTSE India ETF (FLIN)**: Total assets of $2.59 billion, top holdings include HDFC Bank (7.13%), Reliance Industries (6.45%), and ICICI Bank (4.54%), with a year-to-date gain of 3.6% [15]

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]

Core Insights - The iShares MSCI Brazil ETF experienced a significant inflow of $285 million in the week leading up to a call between President Trump and Brazilian President Lula da Silva, discussing potential tariff reductions [2] - The ETF has shown a year-to-date increase of over 37%, indicating strong performance despite previous tariff announcements [2] - In contrast, the iShares MSCI India ETF has only returned 0.23% year to date, highlighting India's underperformance in the ETF category amid similar tariff challenges [3] Brazil's Performance - Brazil's exports to countries other than the US have increased, mitigating the impact of the 50% tariffs imposed on Brazilian goods [2] - The inflow into the Brazil ETF marks the first net inflows since the tariffs were announced in July [2] India's Situation - The Nifty-50 index in India has seen a marginal increase of 2% since the implementation of the tariffs, driven by domestic sectors like financials and consumer discretionary [3] - Key export-oriented sectors such as IT and pharmaceuticals are not affected by the tariffs, contributing to the muted market reaction [3] China's Performance - The KraneShares CSI China Internet ETF and the iShares MSCI China ETF have returned nearly 46% and 43% respectively, indicating strong performance despite some institutional divestment from China [3] Caution in Emerging Markets - Investors in single-country funds, particularly in emerging markets, are advised to exercise caution and monitor their investments more frequently compared to the US market [4]

Core Points - The article discusses the potential for a temporary trade agreement between the United States and India, which may lower the planned tariff rates on India to below 20% [1] - There are indications that India is seeking a more favorable trade agreement compared to the recent U.S.-Vietnam agreement, which has faced complications [6] - Following recent trade negotiations, India has indicated plans to impose retaliatory tariffs on U.S. products in response to U.S. tariffs on Indian automotive imports [7] Group 1 - The U.S. is reportedly working towards a temporary trade agreement with India, which could ease tensions and allow for further negotiations [1] - The Indian government is looking for a trade deal that is more advantageous than the one recently proposed to Vietnam, which has been criticized for its unfavorable terms [6] - After a recent round of negotiations, India has communicated its intention to the WTO regarding retaliatory tariffs on certain U.S. products [7] Group 2 - India is expected to send a delegation to the U.S. for further trade discussions, focusing on resolving disputes over tariffs on automotive parts, steel, and agricultural products [8] - The U.S. has requested India to open its agricultural market, particularly for genetically modified crops, but India has rejected this due to concerns over food security [9] - Key issues remain unresolved, including non-tariff barriers in agriculture and regulatory processes in the pharmaceutical sector [9]