Can India ETFs Deliver Alpha Amid Global Headwinds? Power ETF India's Long-Term Case

The honeymoon for Indian equities appears to have hit a speed bump. The Nifty 50 Index slipped 1.87% in just five days as tariff jitters and foreign capital flight spooked markets. Yet beneath the noise lies a paradox: short-term pain may conceal structural strength. Over six months, the index gained 1.63%, and the 12-month return sits at a respectable 8.41%—not exactly a death knell.

The Macro Picture: Why India Still Matters in 2026

Here’s where it gets interesting. While global GDP growth is expected to lag, India is positioned to outrun the pack. The OECD pegs Indian real GDP at 6.7% for 2025 and 6.2% for 2026. The International Monetary Fund forecasts a 6.6% expansion in fiscal 2026, while India’s own Reserve Bank projects 7.3%—above earlier estimates.

What’s fueling this resilience? Demographics work in India’s favor. A young, digitally-native investor base is expanding. Private consumption is projected to expand 7% year-on-year, private investment will climb 7.8%, and manufacturing is forecast to grow 7%—a jump from 4.5% previously. Government spending is accelerating too, rising 5.2% against prior projections of 2.3%. The National Statistics Office expects the economy to expand 7.4% in the fiscal year ending March—well above the initial 6.3-6.8% range.

Add rapid digital transformation, expanding AI investments, and progress in semiconductor design, and you’ve got a country betting on the future.

Tariffs and Outflows: The Near-Term Drag

The elephant in the room: U.S. tariffs. Washington has already imposed tariffs up to 50% on Indian goods, with Trump contemplating levies as high as 500% on nations purchasing Russian oil. India faces a direct warning—and direct exposure.

Capital is already fleeing. Foreign investors yanked $900 million from Indian equities in January alone after offloading a record $19 billion last year. Geopolitical tensions across Asia add another layer of uncertainty. These headwinds will likely keep volatility elevated through at least Q1 2026.

Yet here’s the disconnect: even with tariff pressures mounting, India’s domestic demand machinery keeps humming. Private consumption and government capex are the shock absorbers, cushioning the blow far more than many economists anticipated.

Shopping for India Exposure: The ETF Menu

For investors ready to nibble despite near-term volatility, several power ETF India options exist:

iShares MSCI India ETF (INDA) commands the largest asset base at $9.58 billion. It’s also the most liquid, with average trading volume around 5.43 million shares per month—a major plus for active traders looking to minimize slippage.

Franklin FTSE India ETF (FLIN) is the cheapest play at 0.19% in annual fees, making it ideal for buy-and-hold investors who want fees eroding minimal gains over decades.

WisdomTree India Earnings Fund (EPI), iShares India 50 ETF (INDY), and First Trust India NIFTY 50 Equal Weight ETF (NFTY) round out the toolkit for different exposure angles.

The Verdict: Timing the Dip vs. Missing the Move

The risk-reward calculus hinges on your time horizon. Six months out, tariff uncertainty and capital outflows could extend weakness. But five years out, demographic tailwinds, manufacturing growth, and digital leapfrogging become the dominant narrative.

Investors comfortable with short-term volatility have a genuine entry point. Those seeking safety should wait for clearer signals on U.S.-India trade negotiations. The long-term Indian growth story remains intact—the question is whether you can afford to be wrong on the timing.