Turned Off by Brazil, Russia and China? Try India, the Last BRIC Standing

As investors wring their hands over financial chaos and falling growth in Brazil, Russia, and China, they're losing sight of the "I" in BRIC, which is India. For technology growth amid a troubled global market, India remains the Jewel in the Crown.

Below, we examine an exchange-traded fund (ETF) that's best positioned to ride India's tech explosion, while broader markets languish and other emerging nations wallow in fear and uncertainty.

Morgan Stanley recently reported that e-commerce sales in India totaled $16 billion in 2015 and are on track to reach $119 billion by 2020. Over the next 15 years, India will witness more people come online than any other country.

Already a major destination for IT outsourcing, India's indigenous tech sector is booming, even as erstwhile emerging market leaders such as Brazil, Russia and China badly stumble.

Driving India's tech sector is the growing appetite for e-commerce among the country's increasingly affluent and tech-savvy middle class, as well as the clamor from businesses for cloud, storage, telecommunications, and data management solutions. Small wonder that e-commerce giant Amazon this month took steps to make India it's second-largest market, after America.

The optimal play on these trends is WisdomTree India Earnings ETF (EPI) , which is comprised of companies incorporated and traded in India that are profitable and that are eligible to be purchased by foreign investors.

 EPI data by YCharts 

With net assets of $1.2 billion, the WiscomTree ETF holds several bellwethers in the India technology sector, includingInfosys and HCL Technologies.

This ETF allows you to leverage India's economic upside (especially in technology), while limiting the downside. Companies selected for the fund's portfolio are weighted based on their earnings in the previous fiscal year; those with negative earnings are excluded and those near break-even are given smaller weighting.

That said, WisdomTree India Earnings gives a larger allocation to small and mid cap stocks than similar India-focused ETFs, which in turn provides more exposure to up-and-coming tech firms.

WisdomTree India is down 7% year-to-date but over the past month it has gained 5.32%, as investors have turned away from other struggling emerging markets to pour capital into a comparatively stronger India.

Burnishing India's prospects in the eyes of investors lately are new reform initiatives from the Indian government to foster high-tech start-ups in the country, in an effort to kick-start growth and break through the bureaucratic red tape for which India is regrettably famous.

WisdomTree India Earnings is a safe and easy way to profit from the multi-year growth of India's tech sector. According to the same Morgan Stanley report, India will be a one-billion-person digital market by 2030. That's the sort ofunstoppable investment trend into which you should put your money.

With the S&P 500 down 2.76% year to date (despite rallies in recent days) and analysts expecting mediocre returns in 2016 at best, or a full-blown correction at worst, now's an opportune time to consider this well-positioned ETF with the potential to beat an overall market downturn. The fund's excellent prospects show that India, in many ways, is the last BRIC standing.

By John Persinos

Source: http://www.thestreet.com/story/13487190/1/turned-off-by-brazil-russia-and-china-try-india-the-last-bric-standing.html

Five Reasons To Invest In India

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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Summary

• Since the May 2014 election of Prime Minister Narendra Modi, India has outperformed other emerging markets in response to a strong reform agenda1.
• Reasons investors should consider India include reforms, GDP growth, fiscal discipline, earnings growth and favorable valuations.
• Investors considering equity allocations to India should keep in mind potential growth in the consumer, infrastructure, and economically sensitive companies, such as small cap companies.

Since the historic election of Indian Prime Minister Narendra Modi last May, India's market has shown few signs of slowing down. In 2014, India was the best-performing emerging market, up more than 29%, and it continues to outperform this year as well.² We believe the market has responded favorably to the robust agenda of reform under the Modi administration, as many believe his policies will enhance India's economic potential.

There are numerous reasons why investors should consider India now and over the long term. Here, we highlight the five key reasons to invest in India right now.

1. Reforms matter

Those emerging market countries that are actively undertaking reform, which we call the "Fab Five" (India, Indonesia, Mexico, Philippines and China), are expected to revive economic growth. Investors are eager to see reforms carried out as a growth catalyst and have rewarded countries such as India (see Figure 1).

The reforms put forth by the new Indian government under Prime Minister Modi intend to privatize state assets (especially the financials and power sectors), increase foreign direct investment, reduce the fiscal deficit by cutting subsidies, deregulate the labor market, upgrade infrastructure and reform the tax regime. We believe these improvements should unleash investment, increase efficiency, raise productivity and boost growth.

2. Favorable demographics and Gross Domestic Product [GDP] growth

The world's largest democracy, India is home to 1.25 billion people, with more than 65% of the population younger than 35. By 2025, India is projected to be the world's most populous country with almost 1.4 billion people. In addition to its population, India's total labor force will continue to grow relatively quickly, by about 1.5% annually. By 2030, there will be about 174 million net new members of the country's labor force.⁴

Furthermore, India's GDP is expected to expand more this year, and is forecasted to be 6.3%, compared to 4.3% in emerging and developing economies (see Figure 2).⁵ By 2016, India's GDP is expected to surpass China's. Today, growth opportunities are very scarce within emerging markets and India is a rare growth opportunity for investors.

3. Fiscal and monetary discipline

The lower price of oil and better fiscal management, including cutting government subsidies, are helping to reduce India's fiscal deficit. India is also focused on managing inflation, which helps the central bank to lower interest rates (see Figure 3). In particular, a strengthening rupee prevents the erosion of return for U.S. investors. Collectively, lower interest rates, lower inflation and lower commodity prices all help to put money in the pockets of consumers and accelerate domestic demand growth.