Global stock markets are shaken by the tariff war originating in the U.S., but the Indian stock market is rising significantly. This is due to global corporations highlighting India as an attractive alternative country for establishing production facilities to avoid tariffs. India is being considered a ‘post-China’ country that can replace China, the world's factory.
In particular, after correcting at the beginning of this year, the Indian stock market is finding appropriate valuation, and it is being evaluated as the right time to invest in India. Domestic asset management companies have consecutively launched exchange-traded funds (ETFs) that can invest in India. These ETFs have recorded considerable revenue since their launch.
According to Investing.com on the 23rd, during the past month (from March 21 to April 22) when the global tariff war intensified, the Indian Nifty 50 index rose by about 3.5%. In comparison, the KOSPI index (-5.71%), the U.S. Nasdaq index (-8.9%), the Japanese Nikkei index (-9%), the Chinese Hang Seng index (-8.9%), and the Vietnamese VN index (-9.4%) all sharply fell, highlighting the rising trend of the Indian stock market.
India is gaining attention as an emerging market that can substitute for China and Vietnam. It is expected that global corporations will expand production in India, where lower tariffs can be applied.
India is one of the five priority negotiating countries proposed by the U.S., and it is the only one among emerging countries. Currently, the reciprocal tariff rate applied to India is high at 26%, but forecasts indicate a high possibility of an early agreement. U.S. Vice President Kamala Harris is scheduled to visit India by the 24th to discuss tariffs with Prime Minister Narendra Modi.
Bloomberg reported on the 21st, 'In India, the atmosphere is growing for expecting a reduction in tariff burden due to an early settlement of negotiations with the U.S.' and added that 'with industry-specific trade negotiations starting this week, the goal is to conclude negotiations by the end of next month.'
On the other hand, Vietnam, which is currently mentioned as a major manufacturing base alongside India, is likely to be utilized by the U.S. as a means to control China. Previously, the U.S. imposed a 46% reciprocal tariff on Vietnam, which had been used as an indirect export base for China. This is among the highest levels after Cambodia (49%) and Laos (48%).
Given the situation, global corporations like Apple and Google are reportedly considering securing production facilities in India instead of Vietnam.
Kim Geun-ah, a researcher at Hana Securities, noted, 'Global corporations will expand production in India to evade tariffs,' adding that 'if India successfully negotiates tariffs ahead of competitors like Vietnam, its attractiveness as a global manufacturing hub will be further enhanced.'
There are analyses suggesting that even if tariffs are imposed on India, the impact from reduced exports will be smaller compared to other emerging countries since the proportion of exports to the U.S. in India's economy is not large. In fact, the share of U.S. exports in India's gross domestic product (GDP) is 2.3%, which is markedly lower compared to major emerging countries like Vietnam (25%) and Mexico (27%).
Investors are also viewing the reduction of valuation burden in the Indian stock market positively. Last year, the Indian stock market saw an increase of nearly 9%, leading to a high valuation burden. Although many wanted to invest in India, dubbed 'the next China,' entering became difficult due to rising stock prices.
However, as the Chinese stock market showed signs of recovery earlier this year, funds flowed out from India, which has a substitutive relationship with China, causing adjustments in the Indian stock market. The controversy over the overvaluation of the Indian stock market has come to a close. Currently, the 12-month forward price-to-earnings ratio (PER) of the Indian Nifty 50 index is 18.5 times, maintaining the average level over the past 10 years. This has significantly lowered from last year’s PER of 23 times, alleviating investor burdens.
Kim Seong-geun, a researcher at Mirae Asset Securities, stated, 'The recent reduced valuation burden in India, low export dependence on the U.S., and benefits from supply chain restructuring are increasing interest in India,' and added that 'a comprehensive approach through ETFs that can invest in the overall Indian stock market could be a meaningful strategy.'
Domestic asset management companies are also continuously launching products related to India. Earlier, on the 1st, KB Asset Management listed the 'RISE India Digital Growth' ETF that invests in India's digital industry, and on the 8th, Samsung Asset Management listed the 'KODEX India Nifty Midcap 100' ETF that directly invests in India's small and mid-cap quality stocks.
Although it has been less than a month since their listing, the revenue of both products is at a good level. Over the past week, the revenue rates were recorded at 6.26% for the 'KODEX India Nifty Midcap 100' ETF and 5.49% for the 'RISE India Digital Growth' ETF, ranking 8th and 10th, respectively, among all ETF revenue rates.