Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How India's Market Rode Out the Global Selloff
Transcript
- Lucas: So the S&P 500 is having its worst month in over a year, right? But some emerging markets are absolutely ripping it. In the last five days, South Korea's index is up over five percent, Taiwan's up nearly six. And then you've got China down, Brazil down. The clear winner in all this? India. The MSCI India index is up, the rupee is stable, and everyone's asking why. Luna: India has been the quiet outperformer for a while now. But this week, with the global selloff, it really stood out. What's driving that resilience? Lucas: Part of it is that India is just less exposed to the global tech cycle that's hitting Korea and Taiwan. India's growth is domestic — services, consumption, infrastructure. So when AI hardware stocks get hammered, India doesn't feel it as much. Luna: And oil prices falling? That's a big deal for India. They import like eighty percent of their oil. Lucas: Exactly. Brent's down over ten percent from its high. For a country that imports that much crude, every dollar drop in oil is a gift. It narrows the trade deficit, helps the rupee, and takes pressure off inflation. It's basically a mini stimulus. Luna: So India is the classic import-export asymmetry. Oil importers win, oil exporters lose. Lucas: Right. And that's visible in the EM split. Brazil is a big oil exporter, and it's down almost two percent this week. India, not so much. Luna: But is this just a short-term thing? I mean, oil prices can reverse. Lucas: Sure, oil could bounce. But the structural story for India is bigger than oil. Domestic savings, a young workforce, and a government that's pouring money into roads, ports, and digital infrastructure. The fiscal deficit is still a concern, but they've shown discipline. Luna: And foreign investors have noticed. They've poured billions into Indian stocks this year. Lucas: Yeah. In fact, India's weight in the MSCI Emerging Markets index has been climbing for years. It's now the second largest after China. And there's this idea that India is becoming a kind of safe haven within EM — not as volatile as some others, but with better growth than most developed markets. Luna: What about the rupee? It's been pretty stable, which is surprising given the dollar strength. Lucas: That's a key point. The trade-weighted dollar index is at 119.7, near its highs. Normally that crushes EM currencies. But the rupee has barely moved. The central bank has been smart — they've built up reserves, they're not fighting the dollar, and they let the currency find a natural level. That stability is a magnet for foreign capital. Luna: So what's the catch? There's always a catch. Lucas: Well, valuations. Indian stocks aren't cheap. The MSCI India trades at a premium to most EM. You're paying up for that stability. And if global risk appetite really turns, India could still get caught in the downdraft. Luna: Yeah, but it's been remarkably resilient. I remember in March 2020, India got hit as hard as anyone. But this time, it's different. Lucas: Look, it's not a perfect safe haven. But it's the closest thing EM has to a defensive play. The domestic growth story is real, and the government has been proactive. That's why you see global funds now treating India as a core holding, not a cyclical bet. Luna: Hmm, that makes sense. It's like buying a bond in a stock market. Lower returns, but lower stress. Lucas: Right. And honestly, if walking through the economy with us has made something click for you, and you want to keep these conversations ad-free, you can support the show at buy me a coffee dot com slash fexingo. It's the smallest ask — if today was worth a coffee to you, that's the link. Luna: Yeah, and it really helps us keep doing what we do. Every little bit counts. Lucas: But back to India — there's one more piece that often gets overlooked: the current account. India's current account deficit is actually narrowing, which is a huge deal. Luna: How so? Lucas: Because a narrower deficit means India needs less foreign capital to fund itself. That makes the economy less vulnerable to sudden stops in global flows. It's a sign of maturity. Luna: So India is becoming more self-sufficient? Lucas: In a way, yes. Plus, they've been diversifying their trade partners. The US is now a bigger market for them, and that helps cushion any slowdown in China or Europe. Luna: Let's talk about the ETF angle. For listeners who want to play this, what should they look at? Lucas: The most direct way is the Vanguard FTSE Emerging Markets ETF, which has a decent India weight. Or the iShares MSCI India ETF, which is India-specific. But the key is to understand you're not just buying a country — you're buying a thesis. India's growth story is about demographics and digital adoption. Luna: And the risks? I mean, there's still the political risk, the bureaucracy. Lucas: Absolutely. Elections can cause volatility. But the long-term trend is intact. The middle class is expanding, and that's a powerful force. Luna: So where do you see India in five years? Still the top EM? Lucas: I think it's going to be a permanent fixture in the top tier. The question is whether it can sustain the growth without overheating. But for now, it's the one emerging market that seems to have its act together. Luna: That's a good note to end on. Thanks Lucas. Lucas: Thanks Luna. And to our listeners, we'll be back tomorrow with another look at the global economy.