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India Got Cheaper. The Trade Window Is Still Open.

India is one of those markets that always sounds compelling in a research note and then underwhelms in your brokerage account. The growth story is real. The follow-through has been messy. So let’s talk about what has actually changed in 2026, because something has — and most U.S. retail investors are not paying attention to it.

Start with the trade picture. U.S. tariffs on Indian goods were cut to a reciprocal rate of 18% — down from a peak of 50% — under a February 2026 U.S.-India interim framework announced on February 6. The additional 25% duty tied to India’s purchases of Russian oil was eliminated effective February 7, 2026. Negotiations toward a broader bilateral trade agreement targeting $500 billion in purchases over five years are still ongoing. U.S. Secretary of State Marco Rubio wrapped up a four-day visit to India from May 23-26, meeting with Prime Minister Modi and Foreign Minister Jaishankar. He described India as one of Washington’s most important strategic partners and said he was optimistic the two countries would finalize a bilateral trade deal soon.

That is not nothing. It is a structural de-escalation after a very ugly period of tariff escalation in 2025.

Now here’s the part that actually interests me from a valuation standpoint.

India Got Cheaper While Nobody Was Looking

Indian equities pulled back sharply in late 2025 and into 2026. The Nifty 50 has traded down roughly 6% over the past 12 months and currently sits in the 23,000-24,000 range — well off its 52-week high near 26,373. Notoriously expensive Indian stocks — which averaged a five-year P/E multiple of around 27x — compressed to roughly 23.8x on the MSCI India Index as of May 2026. That is not cheap in an absolute sense. But it is the most attractive entry point in several years on a relative basis.

Meanwhile, the macro backdrop is holding up. The Reserve Bank of India raised its real GDP growth forecast for FY2025-26 to 7.4% at its February 2026 meeting, up from an earlier estimate of 7.3%. At the April 2026 meeting, the RBI raised that figure again — this time to 7.6% — while projecting FY2026-27 growth at 6.9%. India’s economy is heavily consumption-led (often cited as above 60% of GDP), which can insulate it more than most from global trade volatility. The fiscal deficit is trending lower. That is a reasonably clean macro backdrop for a growth market.

One more thing worth knowing: the correlation between Indian and U.S. equities sits around 0.25-0.30 — one of the lowest among major emerging markets. That is a genuine diversification argument, not a marketing line.

How U.S. Investors Actually Access This

The three main ETF vehicles, ranked by methodology:

• INDA (iShares MSCI India ETF): Broad market-cap weighted, 0.61% expense ratio. The default choice. Top holdings include HDFC Bank, Reliance Industries, ICICI Bank, Bharti Airtel, and Infosys. Trading near $49.70 as of mid-June 2026, with a fund-level P/E of around 20.7x.
• EPI (WisdomTree India Earnings Fund): Earnings-weighted rather than market-cap weighted — this is the differentiator. Expense ratio is 0.84%. Over ten years, EPI returned 168.76% vs. INDA’s 117.83%. Over five years, EPI gained 46.73% vs. INDA’s 26.27%. The earnings filter steers capital toward profitable companies rather than richly valued growth names. That edge has costs: a higher fee and more sensitivity to foreign institutional outflows, which pressured the fund in 2025 and early 2026.
• SMIN (iShares MSCI India Small-Cap ETF): Roughly 450-500 small-cap Indian stocks. Higher growth potential, higher volatility. Expense ratio is 0.74%. Trading near $69.82 as of mid-June 2026.

What Could Go Right. What Could Go Wrong.

Bull: A broader U.S.-India trade agreement gets finalized in the back half of 2026 — Rubio said he is optimistic. Foreign institutional investors return. The RBI’s growth projections prove accurate. EPI or SMIN quietly outperforms U.S. indices for the second consecutive year.

Base: Trade deal negotiations drag into 2027. India grows at 6.5-7%. Valuations stay compressed but don’t move meaningfully. The position becomes a slow-build diversifier rather than a near-term catalyst play.

Bear: The Iran conflict escalates further, pushing oil prices higher and pressuring India’s import bill — India was already hit hard by the effective closure of the Strait of Hormuz. Fresh tariff headwinds from Washington remain a risk; the current framework is non-binding and includes a snapback clause if Russian oil purchases resume. FII outflows accelerate.

Cheap Investor Scorecard

• RBI GDP growth forecast: 7.6% for FY2025-26; 6.9% for FY2026-27
• MSCI India P/E vs. history: ~23.8x, down from a five-year average near 27x
• U.S.-India tariff rate: cut to 18% from a peak of 50%, with the Russia-linked 25% penalty removed effective Feb. 7, 2026
• Correlation to U.S. equities: 0.25-0.30 (low — real diversification value)
• Household equity participation in India: roughly 6% of financial assets vs. 40%+ in the U.S. (long runway)
• Trade deal catalyst: still pending, still in play — Rubio visit in late May reinforced momentum
• Key risks: oil prices, tariff snapback clause, geopolitical escalation via Iran conflict

The India story never quite dies. It also never quite delivers on the timeline everyone expects. What is different now is that you can buy it at a better price than most of 2024 or 2025 — and with a trade de-escalation already partially in motion. Whether the full deal closes this year or next probably matters less than whether you got in before it did.