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Fund Spy

Pursue the Explosive Indian Stock Market With Care

A look at the funds that invest in 2012's hottest market.

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The Indian stock market has shone in 2012 amid notable improvements in the U.S. economy, moderate progress on Europe's challenges, and other positive developments around the world. The MSCI India Index has gained 27% in U.S. dollar terms for the year to date through Feb. 29, in fact, as macroeconomic conditions have gotten better there and the rupee has strengthened versus the U.S. dollar. That return compares quite favorably to those of other stock markets in the developing world as well as to those of equity exchanges in general: The MSCI Emerging Markets Index has returned 18%, and the MSCI All Country World Index has returned 11% in U.S dollar terms thus far in 2012. 

This year certainly isn't the first time in the 2000s that Indian stocks have thrived during rallies. Indeed, the MSCI India Index posted an 85% annualized gain as stocks surged around the world from March 2009 through December 2010, while the MSCI Emerging Markets Index earned a 65% annualized return and the MSCI All Country World Index earned a 46% annualized return during that time span. India stocks also posted terrific absolute gains and topnotch relative returns in the early 2003 to late 2007 global stock rally. As a result, the Indian market has been one of the best places in the world to invest over the past decade, with an 18% annualized return over the period.

William Samuel Rocco does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.