The Indian Stock Market: How to Invest in the World’s 5th-Largest Economy

When it comes to growth, the Indian stock market continues to be a prominent part of the global conversation. That’s because by any measure you choose — whether it’s the number of people who are investing, national economic expansion, or the value of leading publicly traded companies — India has impressive numbers.

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According to BSE, which was formerly known as the Bombay Stock Exchange, registered investors in India topped 160 million at the beginning of 2024. That’s slightly more than the number of Americans that own stock — and while adoption isn’t exactly growing aggressively in America, India continues to see young and hungry investors dive in at a rapid clip.

As for dollars, the figures are equally impressive. In May, the market capitalization of India’s stock market hit the $5 trillion mark. That makes it one of just five national markets above that threshold — the others being the U.S., China, Japan and Hong Kong.

Looking to the economic side of things, the International Monetary Fund has projected that real gross domestic product growth for India in 2024 will come in at an impressive 6.8% annual rate — making it the fastest-growing nation that’s in the G20. Considering India is already the fifth-largest economy in the world as measured by GDP, that’s an even more impressive feat.

With stats like that, the Indian stock market is attractive globally and not just to local investors. That means U.S. traders are increasingly looking for ways to invest in the world’s fifth-largest economy.

How to Invest in the Indian Stock Market via ETFs

If you’re looking for a diversified way to invest in India via an exchange-traded fund, the iShares MSCI India ETF (ticker: INDA) is far and away the most established option. It commands more than $10 billion in assets under management, and trades roughly 4 million shares in a given session, making it as liquid and well-capitalized as many ETFs that focus on domestic blue-chip stocks.

About 140 total stocks make up INDA’s portfolio, including energy giant Reliance Industries Ltd. (NS.RELIANCE), major financial institution ICICI Bank Ltd. (IBN) and tech stock Infosys Ltd. (INFY). So if you’re looking for a simple way to play major investments in the region, this is one of the best ways to do so.

The fund charges 0.65% in expenses, or $65 annually on each $10,000 invested. Top sectors are financials at 24%, followed by consumer cyclical at 13%.

There are other India ETFs of note, too, however. These offer slightly different exposure to the region but all are reasonably large and established in their own right:

WisdomTree India Earnings Fund (EPI). At $3 billion in assets and a 0.85% expense ratio, it is more expensive than the prior fund and offers a similar list of top holdings. It holds a broader portfolio of about 480 total holdings, however. It also has less in financials (18%) and ranks energy as its No. 2 sector (13%).

Franklin FTSE India ETF (FLIN). At $1 billion in assets, this fund is well established, and at just 0.19% it is cheaper than the others by a considerable measure. The portfolio is about 230 stocks with top holdings looking similar, and top sectors ranked as financials (22%) followed consumer cyclical and energy (12% each).

iShares MSCI India Small-Cap ETF (SMIN). And now for something completely different: SMIN is a $900 million fund that holds about 500 small-cap India stocks — many of which Western investors have never heard of, as they are solely listed on domestic exchanges. The fund isn’t overly costly at 0.79% in annual expenses, but keep in mind it does carry a higher risk profile as it invests in smaller and less-established companies.

[See: 7 Best Mid Cap Stocks to Buy Now]

How to Invest in India Stocks Directly

If you’d prefer to buy individual stocks, there are only a few options for you via companies that are dually listed on U.S. exchanges as well as in India.

A list of some of the largest India stocks as of this writing includes:

— Dr. Reddy’s Laboratories Ltd. (RDY), a $12 billion health care stock.

— GAIL (India) Ltd. (ITC: GAILF) a $14.5 billion utility stock.

— HDFC Bank (HDB), a $144 billion financial stock.

— ICICI Bank, a $93 billion financial stock.

— Infosys, a $70 billion tech stock.

— MakeMyTrip Ltd. (MMYT), an $8 billion consumer discretionary stock.

— State Bank of India (OTC: SBKFF), an $80 billion financial stock.

— Wipro Ltd. (WIT), a $27 billion tech stock.

Unfortunately, if you want to buy into other companies — including small players as well as big players that simply don’t appear on this list such as the Life Insurance Corporation of India (NSE.LICI) or industrial giant Tata Group — there aren’t many other options out there. The vast majority of stocks are only available domestically, or to foreign institutional investors.

That means you have to go through an ETF provider, like the ones mentioned previously.

As with all investments, it is critical to do your own research and invest with your personal risk tolerance and financial goals in mind. India stocks can hold a lot of potential, but also can be highly volatile — so do some serious thinking about whether this strategy is right for you before you get practical about how to invest in India.

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