India-focused ETFs may be ready to rally

The OECD warns a second virus wave is as likely as not — here’s what that would do to the economic recovery

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India’s economy was affected by the COVID-19 pandemic. But could the impact of vaccines, combined with the underlying drivers of the country’s growth, boost India-focused exchange-traded funds in 2021? India has been hit hard by the pandemic, with more than 10 million cases. Its economy suffered in 2020; In a January 2021 note, IHS Markit estimated that gross domestic product in fiscal year 2020-21, ending March 31, would contract 8.9% compared to the previous year.

However, there could be positive signs for the future. The company has seen a rebound in economic activity since September and expects GDP growth to rebound to 8.9% in fiscal 2021-22. Meanwhile, on February 1, the government announced higher infrastructure spending in its budget, which analysts believe could also support growth. India’s rebound in recovery was led by high-quality, large-cap companies, particularly tech, energy and healthcare, says Rene Reyna, chief strategist for specialty and thematic products at Invesco ETFs & Indexed Strategies. The firm operates Invesco India ETF PIN, -0.18%, a $ 107.2 million fund that had returns of 18.5% in 2020 and is down approximately 2% year-to-date, through January 29. Reyna says India’s large information technology sector was a particular driver of the recovery, “benefiting from aggressive work-from-home efforts.” An expanded version of this report appears on WSJ.com. Also popular on WSJ.com: Want more stimulus control? Consider filing your tax return early. Elon Musk’s dogecoin tweet has believers asking for more.