CONTRIBUTORS
Bobby Eng, CIMA®
Senior Vice President, Head of Institutional ETF Distribution,
Franklin Templeton Canada
I recently had the privilege of hosting clients and colleagues at an event focused on the future of Indian equities, and I wanted to take this opportunity to share some of what we discussed.
India has proven itself as an emerging markets growth engine over the years. But this has led to concerns about valuations and future growth potential. Our event looked to tackle these issues directly, featuring expert guests offering top-down analysis of the Indian market, while exploring how institutional investors are using ETFs to gain exposure to the region. Here are some of the key insights we learned, courtesy of Indrani De, CFA, PRM, Head of Global Investment Research at FTSE Russell, Adrien Lucisano, Managing Director of Portfolio Completion at IMCO, and Amit Gandhi, Head of Portfolio Trading at PGM Global.
A Nation at a Precipice
India's post-Covid growth has been balanced, driven by robust infrastructure and capital expenditure (capex) investments, as well as resilient consumer spending. Unlike other emerging markets, such as Brazil with its inflation shocks or China with deflationary pressures, India has maintained a stable inflation rate. This stability has attracted strong portfolio inflows into both equity and fixed income markets, giving India a stronger foundation compared to many of its emerging market peers.
In recent years, the local currency Indian Government Bond market (IGB) has tripled in size, making it the fourth largest in the APAC region. The Reserve Bank of India (RBI) has enhanced market access by offering more FX hedging tools and loosening restrictions for foreign investors. The inclusion of eligible IGBs in the FTSE EMGBI, AGBI, and APGBI indices from September 2025 is expected to further boost foreign investor interest and drive growth.
Indian fixed income markets have performed well, with the FTSE India Government Bond Index delivering total returns of 7.5% in 2023 and 6.9% in 2024, in USD terms. The equity market was one of the top performers in the APAC region in 2024, with the FTSE India Index advancing by 13.3%. This growth was driven by solid domestic fundamentals and rising capex, particularly in the Technology and Consumer Discretionary sectors. Software and Computer Services have benefited from the global AI upcycle and India’s advancements in fin-tech.
All these elements – stable growth across the capital markets, insular economic drivers, a credible policy regime, and improving foreign access – have helped shield India from many of the global uncertainties that have rattled markets in the post-Covid era. The question for investors today is – how can India continue building on this?
The Road Ahead
Despite a slowdown in Foreign Direct Investment (FDI) inflows since 2022, India's growth has remained robust. The economy is more domestically driven, fueled by a rapidly growing middle class, which makes it less vulnerable to global policy and geopolitical uncertainties outside the region. Further to that, India is particularly insulated from US tariff measures, unlike other APAC countries that rely more heavily on US consumption. Exports to the United States account for only about 4% of India’s GDP, reducing its exposure to unpredictable White House policy.
The infrastructure and capex initiatives that bolstered India's post-Covid recovery have not slowed down. In fact, they’re gaining momentum. Key drivers include the expansion of telecommunications infrastructure and the rollout of 5G networks, investment in healthcare, particularly in pharmaceuticals and vaccine development, and advancements in IT services, driven by rising demand for AI and blockchain technologies in the Financial Services sector. Significant projects in transportation, energy, and urban development are also underway, and the ongoing modernization and expansion of India’s infrastructure will continue to be a dynamic force for India’s economy and capital markets.
On the policy front, Indian officials have shown responsible stewardship of both fiscal and monetary policy, balancing growth targets with deficit reduction. Having worked diligently on debt reduction, India’s general government debt to GDP ratio is closely aligned with other G7 economies, and is now below China’s. The RBI’s recent rate cuts, the first since 2020, signal a pivot towards growth as inflation returns to the target range. And the government’s balanced approach to managing debt and growth, is expected to continue making the region hospitable to new investment.
Valuations and Growth Outlook
While India’s valuations have risen on the back of strong performance, Indian equities remain fundamentally attractive. The market is well-balanced across industries, reducing concentration risks. A growing middle class is fueling strong consumption and demand for more sophisticated goods and services across sectors. Although valuations are high compared to historical levels and APAC peers, forecasted EPS growth and upward earnings revisions suggest continued advances. On a risk-reward basis, India appears more favourable than other leading emerging markets, offering relatively more stable economic and sociopolitical conditions.
As India continues to implement reforms and attract investment, it is likely to play an increasingly significant role in the global financial landscape, which should continue to fuel capital market growth and present new opportunities for investors.
Institutional Investors Allocating to India
During our discussion we heard multiple times that clients with emerging market allocations are overweight India relative to broader emerging market indices – and they’re using ETFs as a trading tool.
In our panelists’ view, ETFs offer institutional investors several potential benefits compared to direct investing. First, they represent a cost-efficient way to get exposure with speed and scalability. Second, ETFs provide for more tactical freedom with greater optionality for liquidity management, customization, thematic investing and rebalancing. And third, accessing the market via ETFs reduces the regulatory and operational burden for investors. All this is to say that ETFs represent the cleanest and easiest way to get Indian market exposure with an active and liquid market.
Final Thoughts
We’ve been receiving tremendous feedback since the event concluded, and I can’t wait for the next opportunity to host clients for another thought-provoking conversation with industry experts. In the meantime, if you’re looking for more key insights and market analysis, I encourage you to check out our ETF Blog page.
IMPORTANT LEGAL INFORMATION
Bobby Eng’s comments, opinions and analyses are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinion, and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.
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