With high interest rates and a stronger dollar, the macroeconomic environment isn’t conducive to contrarian emerging markets investors. However, one attractive destination worth considering is India.
“India continues to be an attractive destination for emerging market investors, many of whom are moving money from global emerging markets portfolios into dedicated India funds,” a Money Control article said, according to Cameron Brant, director of research, EPFR. Furthermore, the article noted that funds focused on India “continue to be on a winning streak.”
Fund flows are lessening as of late amid geopolitical volatility in other parts of the world. But ,India continues to see a healthy amount of capital allocation.
“Even though the total flows might have dropped a bit in recent weeks, India is still seeing above-average flows week in and week out,” Brant noted.
Outside of India and certain other countries, EM funds are seeing investors head for the exits. Inflows into India assets are essentially bucking the trend of a safe haven flight in the current economic environment.
“We continue to see outflows from Global Emerging Market funds and fairly solid inflows in most of the major single country Asia funds. [These funds are] dedicated to India, Japan, Taiwan, and Korea,” Brant said.
2 Plays to Consider
Downward pressure due to inflation and high interest rates could persist. If so, traders can continue to play the bearish side of EM. That said, for triple leverage, consider the Direxion Daily MSCI Emerging Markets Bear 3X ETF (EDZ). EDZ seeks daily investment results equal to 300% of the inverse of the daily performance of the MSCI Emerging Markets Index.
With the bullish vibes in India, traders may want to opt for exposure to the Direxion Daily MSCI India Bull 2x ETF (INDL). It seeks daily investment results equal to 200% of the performance of the MSCI India Index. That index measures the performance of the large- and midcap segments of India’s equity market. It covers approximately 85% of companies in the country’s equity universe.
“India’s nominal GDP measured in USD terms is forecast to rise from $3.5 trillion in 2022 to $7.3 trillion by 2030,” noted a S&P Global Market Intelligence report. “This rapid pace of economic expansion would result in the size of the Indian GDP exceeding Japanese GDP by 2030. [This would make] India the second largest economy in the Asia-Pacific region.”