India — an investment that will protect against oil decline


India is one of the fastest growing markets in 2022, overtaking the U.S. and China. Let’s see what makes India interesting.

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The main alternative to China

  • India has an army of 5 million IT professionals (the main resource of modern manufacturing), slightly behind the U.S. and ahead of China.

  • Unlike China, India’s population and economic growth is unstoppable: expect 1.5 billion people by 2035; a doubling of GDP in the next 10 years, and parity with the US by 2050.

  • India is closely integrated into Western society; a third of Silicon Valley directors and 10% of the world’s startup CEOs are English-speaking Indians.

  • After Russia’s exclusion from the indices, it is India that has taken its place (its market is not as heavily regulated as China’s), as a consequence of which it can get a large inflow of Western capital.

  • India is the third oil importer in the world, and its economy is inversely dependent on energy prices, buying India is an excellent hedge against a possible fall in Brent.

What India’s market looks like

  • Both major exchanges are based in Mumbai. The NSE ($3.4 trillion) is now the world’s sixth-largest by capitalization, overtaking Hong Kong. The BSE ($2.2 trillion) is close to London and Toronto, closing the global top 10.

  • The total value of assets of the two Indian platforms ($5.7 trillion) is comparable to the capitalization of the Shanghai or Tokyo exchanges.

  • About 7.5 thousand companies are traded on all stock exchanges in India (there are nine of them in different states), but this is only 4% of the Indian economy; i.e. 96% of enterprises (by weight in GDP) have not been listed yet.

  • Small and medium-sized enterprises dominate on the stock exchanges of India; the share of conventional heavyweights (top 10 companies) accounts for only about a quarter of the market value, which makes it widely diversified.

  • Among investors, there are a few relatively well-known Indian big companies and global brands — Reliance, Infosys, Tata, Mahindra & Mahindra — but their influence on the dynamics of the Indian market is insignificant.

How to invest in India

All major companies are traded simultaneously on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Only the rupees are traded, so foreign players hedge their purchases with dollar derivatives. This has made India the largest currency futures market in the world.

Secondary listings in London and New York via depositary receipts or offshore markets (following the example of China) have not caught on among Indian corporations. However, a few stocks are still traded in the US.

Because of local specificity in India, funds are more in demand than buying individual stocks. The total assets of mutual funds exceed 40 trillion rupees (about $500 billion). Large Western providers arrange access to India through exchange-traded dollar funds (ETFs).

What’s the difference between INDA and EPI

Until recently, it was only possible to invest in India, in the over-the-counter market or in conjunction with other markets (via emerging market indices). In November, two international ETFs started trading at once, and now India can be bought as close as possible to Mumbai prices.

iShares MSCI India ETF (INDA)

The largest and most liquid fund on Indian equities. $4.5 billion in assets, 100 million shares outstanding, each worth just over $40; turnover averaging 2.5 units per day (over $100 million). Management fee is 0.68% per year.

WisdomTree India Earnings Fund (EPI)

The second-largest exchange-traded fund in India. Its assets are about $740 million; about 23 million shares outstanding at the price of slightly more than $30 per share, the daily cash turnover is about $10 million. The commission is 0.84%.

The main difference between the funds is the depth of diversification. The first one (INDA) has slightly more than 100 Indian companies in its portfolio. The second one (EPI) has more than 400; therefore the share and influence of big companies differ (75% vs. 58% respectively).

As a result, INDA focuses more on technology, while EPI focuses on raw material extraction. This in turn affects the dynamics of the funds’ shares. INDA rises faster during rallies but also falls harder during market corrections.


India — a market comparable in size to China, but more open, with more room for modernization and more stable growth. Investors are primarily interested in the country as a hedge against oil decline; its indices are inversely dependent on the cost of energy. It makes little sense to buy Indian heavyweights, because the main market dynamics are given by hundreds of small and medium-sized companies.

The most effective way to invest in India right now are the INDA and EPI exchange-traded funds. They differ from each other in asset size (INDA is larger), portfolio width (EPI is better diversified) and commissions (INDA is slightly cheaper).


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