Morgan Stanley says India is having its longest and best bull market ever. Here's an ETF to play it

Published Thu, May 2 202411:35 AM EDTUpdated Thu, May 2 20241:40 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

India's historic stock market rally shows no signs of slowing down and there is still time for investors to jump in, according to Morgan Stanley. Strategist Ridham Desai said in a note to clients Thursday that the bull market for India stocks still has several years of runway and will surpass the 2003 to 2008 period as the longest in the country's history. "In temporal terms, this bull market is aging — but it's still young in terms of returns, especially because we see some distance for the earnings cycle to go, driven by some surprising changes underway in India. Therefore, this is set to be India's longest and best bull market ever," the note said. Desai said corporate earnings in India could grow at a compound annual rate of 20% for the next four to five years. The reasons for the long-term rally include an improving government financial situation, progress on social equity and more local citizens investing in the market, according to Morgan Stanley. "India's terminal growth is also likely higher than the rest of the world, given the tailwind of demographics and other aspects of India's growth story," the note said. Directly buying India stocks can be difficult for U.S.-based investors, but several exchange-traded funds are doing a solid job of capturing the market rally. The biggest U.S. ETF tracking India, the iShares MSCI India ETF (INDA) , is up more than 7% year to date and more than 27% over the past 12 months. The fund hit a new intraday all-time high on Thursday. INDA 5Y mountain The iShares MSCI India ETF is trading at all-time highs. INDA, which has an expense ratio of 0.65%, has pulled in more than $1.2 billion of investor cash this year, according to FactSet. The fund's top holdings include Reliance Industries, Icici Bank and Infosys . Some of the smaller India ETFs have actually outperformed INDA recently. The WisdomTree India Earnings Fund (EPI) , which tracks an index weighted by total net income , is up more than 10% year to date and about 37% over the past 12 months. The Franklin FTSE India ETF (FLIN) is also up more than 7% in 2024, but 31% over the past year. EPI and FLIN have expense ratios of 0.85% and 0.19%, respectively.