The MSCI Emerging Markets Index entered Monday with a year-to-date gain of nearly 31%. India stocks, which represent the third-largest allocation in that gauge, have been overt disappointments.
Underscoring that point, the MSCI India Index is higher by just 1% this year. While that may not sound like an engraved invitation to flock to ETFs such as the WisdomTree India Earnings Fund (EPI) and the WisdomTree India Hedged Equity Fund (INDH), the 2025 lethargy displayed by India equities could signal 2026 opportunity.
Looking toward next year, EPI and INDH could be in for better things for multiple reasons. That includes the possibility that market participants will come to grips with U.S. tariffs aimed at India. It also includes the India equity market’s low correlations to domestic stocks. That could make the ETFs appealing to investors seeking diversification.
Regarding the U.S. trade levies, some market observers argue the 50% rate is too high to carry out long-term. White House easing on that front in 2026 could be a catalyst for funds such as EPI and INDH.
India ETFs Could Enjoy 2026 Tailwinds
There are other reasons EPI and INDH could be 2026 stars in the single-country ETF complex. For example, notoriously expensive India stocks have more attractive valuations today thanks to this year’s laggard showings.
“Underperformance has made India’s notoriously expensive stocks cheaper. Ting calculates that the market is trading at 23.5 times earnings, off from a five-year average of 27,” reported Craig Mellow for Barron’s.
Additionally, Prime Minister Narendra Modi and the Reserve Bank of India (RBI) aren’t sitting on their hands. Rather, Modia and the central bank are making moves to bolster India’s massive economy. Those actions could reward investors next year.
“A simplification of the national goods and services tax, plus 125 basis points in interest-rate cuts to 5.25%, have pushed the RBI’s growth estimate from 6.5% to 7.2% for this fiscal year,” according to Barron’s.
EPI and INDH could benefit from another tailwind in 2026. Recent data indicate analysts and asset managers view India stocks as the top hedge against AI trade risks.
“With the AI frenzy fading and India’s stock valuations falling back near their five-year average after sharply trailing peers this year, the consumption-driven economy is back in favor. India’s equity gains are still driven by banks, consumer firms and services, offering a way to cut risks tied to a narrow group of AI winners,” reported Bloomberg.
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