When it comes to growth, the Indian stock market continues to dominate the global conversation. That’s because no matter what measure you choose – the number of people investing, the country’s economic growth, or the value of its major listed companies – India has impressive numbers.
According to the BSE, formerly known as the Bombay Stock Exchange, India’s registered investors are set to top 160 million at the start of 2024, slightly more than the number of Americans who own stocks. While adoption has not picked up as aggressively in the U.S., India continues to see a rapid influx of younger, more ambitious investors.
In dollar terms, the numbers are equally impressive: In May, India’s stock market capitalization hit the $5 trillion mark, making it one of only five markets to have surpassed that mark — the others being the United States, China, Japan and Hong Kong.
On the economic front, the International Monetary Fund projects India’s real gross domestic product (GDP) growth rate to be an astounding 6.8% annually in 2024, making it the fastest growing economy among the G20 countries — an even more impressive feat given that India is already the world’s fifth-largest economy as measured by GDP.
Statistics like these suggest that the Indian stock market is attractive not just to domestic investors but also globally, meaning U.S. investors are increasingly looking for ways to gain exposure to the world’s fifth-largest economy.
How to invest in Indian stock market through ETFs
If you’re looking for a diversified way to invest in India through an exchange-traded fund (ETF), the iShares MSCI India ETF (ticker:INDA) is by far the most established option. With over $10 billion in assets under management and roughly 4 million shares trading per transaction, it’s highly liquid and well-capitalized, like many ETFs focused on the country’s blue-chip stocks.
INDA’s portfolio comprises of around 140 stocks in total, including energy major Reliance Industries (NS.RELIANCE), leading financial institution ICICI Bank (IBN) and tech stock Infosys (INFY), so if you want an easy way to get exposure to some of the region’s leading investments, this is one of the best ways to do it.
The fund charges expenses of 0.65% per $10,000 invested, or $65 per year. The top sector is financials at 24%, followed by consumer cyclicals at 13%.
However, there are other India ETFs worth checking out, which have slightly different exposures to the region but are all fairly large and hold their own.
- WisdomTree India Earnings Fund (Episode). With $3 billion in assets and a 0.85% expense ratio, it’s more expensive than the previous fund, but has similar top holdings. But it has a broader portfolio, with roughly 480 holdings. It also has a lower weighting in the financial sector (18%), with energy coming in second (13%).
- Franklin FTSE India ETF (Flynn). With $1 billion in assets, the fund is well established and significantly cheaper than other funds at just 0.19%. The portfolio has around 230 stocks and similar top holdings, with financials (22%) as the top sector, followed by consumer cyclicals and energy (12% each).
- iShares MSCI India Small Cap ETF (Sumin). Now, for a whole other story. SMIN is a $900 million fund that holds around 500 Indian small and mid-cap stocks, many of which are only listed on domestic exchanges and therefore unheard of by Western investors. The fund has a modest annual expense of 0.79%, but be aware that it has a higher risk profile as it invests in smaller and lesser known companies.
How to invest directly in Indian stocks
If you want to buy individual stocks, your only option is to go through companies that are listed on both US and Indian exchanges.
The list of the largest stocks in India at the time of writing is as follows:
- Dr. Reddy’s Laboratories Inc. (RDY), a healthcare stock with a market cap of $12 billion.
- GAIL (India) Ltd. (ITC: GAILF) is a public utility stock with a market capitalization of $14.5 billion.
- HDFC Bank (HDB), a $144 billion financial stock.
- ICICI Bank, a $93 billion financial stock.
- Infosys, a tech stock with a market capitalization of $70 billion.
- MakeMyTrip Ltd. (MMYT), a consumer discretionary stock with a market cap of $8 billion.
- State Bank of India (OTC: SBKFF), a financial stock with a market cap of $80 billion.
- Wipro Ltd. (WIT), a tech stock with a market capitalization of $27 billion.
Unfortunately, if you want to buy shares in other companies (including larger ones not on this list, such as Life Insurance Corporation of India (NSE.LICI) and industrial giant Tata Group, as well as smaller ones), you don’t have many other options. The vast majority of shares are only available to institutional investors, domestic or foreign.
This means you will need to go through an ETF provider like those mentioned above.
As with all investments, it is important to do your research and invest with your personal risk tolerance and financial goals in mind. Indian stocks have great potential but can also be very volatile. So before you commit to how to invest in India, seriously consider whether this strategy is right for you.
