India’s economy took a pounding from the COVID-19 pandemic. But could the impact of vaccines — combined with the country’s underlying drivers of growth — boost Indian-focused exchange-traded funds in 2021?
India has been hard hit by the pandemic, with more than 10 million cases. Its economy suffered in 2020; in a January 2021 note, IHS Markit estimated that gross domestic product in the fiscal year 2020-21, which ends March 31, would contract by 8.9% compared with the previous year.
However, there could be positive signs for the future. The firm notes a rebound in economic activity since September, and expects GDP growth to bounce back by 8.9% in the 2021-22 fiscal year. Meanwhile, on Feb. 1 the government announced increased spending on infrastructure in its budget, which analysts believe could also support growth.
India’s recovery rally was led by high-quality, large-cap companies, particularly those in technology, energy and health care, says Rene Reyna, head thematic and special product strategist at Invesco ETFs & Indexed Strategies. The firm operates Invesco India ETF PIN, -0.18%, a $ 107.2 million fund that had returns of 18.5% in 2020 and is down about 2% so far this year, through Jan. 29. Reyna says India’s large information-technology sector was a particular driver of the rebound, “benefiting from aggressive work-from-home efforts.”
An expanded version of this report appears on WSJ.com.
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