Exchange-traded funds (ETFs). ETFs that focus on Indian markets offer a straightforward, low-cost way to gain exposure to a broad range of Indian companies. These funds typically track an index of Indian stocks, providing diversification across sectors. For example, the iShares MSCI India ETF (INDA) tracks the performance of large and mid-sized companies in India, giving investors access to the country’s most influential firms.
Mutual funds. Similar to ETFs, mutual funds that focus on India allow investors to pool their money to invest in a portfolio of Indian assets. However, mutual funds are usually actively managed, meaning that a fund manager selects the investments with the aim of outperforming the market. Funds like the Franklin India Fund offer exposure to Indian equities while benefiting from professional management.
Direct stock purchases: For investors who want to take a more active role in their investments, purchasing stocks directly on the Indian stock exchanges, such as the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE), is an option. This approach requires a deeper understanding of individual companies and the Indian market, but it allows investors to target specific sectors or businesses.
American depositary receipts (ADRs): ADRs represent shares in foreign companies and are traded on U.S. exchanges. Investing in Indian companies through ADRs, such as Infosys (INFY) or Wipro (WIT), provides exposure to India’s economy without the need to navigate foreign exchanges. ADRs offer a convenient way for U.S. investors to invest in Indian companies while benefiting from the regulatory protections of U.S. markets.
Private equity: Private equity offers accredited investors another way to invest in India’s economy. Private equity firms often invest in Indian startups or established businesses with growth potential, providing capital in exchange for equity. This option makes the most sense for accredited investors with a higher risk tolerance and a longer investment horizon, as private equity investments are typically illiquid and require significant capital.