India ETFs to Watch After Rough 2026 Start

MSCI Emerging Markets has gained 26% year-to-date in 2026 while the MSCI India Index is down 8.52%. The WisdomTree India Earnings Fund (EPI) and the WisdomTree India Hedged Equity Fund (INDH) have both posted returns above the MSCI India benchmark so far this year.

Morgan Stanley Chief Asia Economist Chetan Ahya cited recent Indian macro data, pointing to an acceleration in bank lending and passenger vehicle sales. “Bank credit growth is growing as of the last biweekly data point that we got… It’s growing at 17.7% year-on-year, and car sales are growing at 27% in the month of May,” Ahya noted.

Both ETFs have sizeable exposure to financials, with roughly 24% allocated to that sector in each fund. EPI is an earnings-weighted India equity ETF. INDH provides equity exposure while using a hedge to reduce rupee-to-dollar currency risk for U.S. dollar investors. Those sector and structure characteristics make near-term performance sensitive to domestic lending and consumer demand.

Market context has driven part of the divergence. Analysts cite stronger near-term earnings growth in tech-heavy Asian markets such as South Korea and Taiwan, which has supported broader emerging-market gains and redirected some investor flows away from India this year. Ridham Desai, head of India research at Morgan Stanley, emphasized long-term growth prospects in India, noting, “Equities is a quintessential long-duration asset class. In the long run, what matters is terminal growth.” He added that India’s longer-term growth outlook has not materially changed despite a near-term growth gap.

Investors assessing India exposure face a mix of rising domestic credit and vehicle demand, sector concentration in financials within the ETFs, and a multinational earnings backdrop that has benefited other Asian markets. The funds’ performance this year reflects those factors and the funds’ specific index and currency-hedging structures.