India’s Nifty 50 is outperforming the S&P 500 so far this year

India’s Nifty 50 is outperforming the S&P 500 and analysts told CNBC the index could go even higher this year.

The South Asian benchmark has surged 11.8% so far this year, outpacing the S&P 500’s 9% gain, and crossed the 25,000 level for the first time last week.

Traders increasingly expect the U.S. Federal Reserve to cut interest rates in September, and that environment could boost Indian stocks. A U.S. rate cut would give the Reserve Bank of India more flexibility to start monetary easing as a depreciating U.S. dollar strengthens the rupee and lowers global borrowing costs.

“Indian companies with dollar-denominated debt would benefit from reduced interest expenses, improving their profitability and making their stocks more attractive to investors,” Ayush Babel, global associate director of quantitative research at WisdomTree, explained.

To be sure, stocks around the world plunged on Monday after a disappointing U.S. jobs report renewed fears of a recession. Japan’s Nikkei 225 plummeted 12.4% Monday for its worst session since the 1987 Black Monday crash, while the Nifty 50 dropped just 2.7%.

Indian stocks have held up better than regional peers for two main reasons, according to Malcolm Dorson, senior portfolio manager at Global X ETFs.

“India’s growth is less reliant on U.S. demand than that of countries such as Taiwan and China. Second, India is still broadly under-owned by international investors. It’s a strong and well-known story, but many investors have been waiting for dips to buy. This might have been a window,” Dorson told CNBC.

Babel predicted, “With continued momentum and favorable macro environment, India is well positioned to deliver further upside of 5%-15% this year.”

“The psychological 25,000 mark acted as a momentum catalyst, as round numbers tend to catch market attention. Notably, the Nifty 50 surged from 20,000 to 25,000 in just 220 sessions, making it the fastest 5,000-point rally in its history,” Babel said.

The BSE Sensex also crossed the 80,000 mark for the first time last Wednesday.

That bullishness is also supported by Prime Minister Narendra Modi’s pledge to make India the world’s third-largest economy by 2030 and a developed nation by 2047. The National Stock Exchange of India already has a total market capitalization of $5.19 trillion — the third largest in Asia-Pacific, according to data from the World Federation of Exchanges.

The world’s most populous country is also making strides to become a manufacturing powerhouse in Asia.

“There’s increased interest from foreign investors, with exponentially increasing investments in India’s manufacturing sector. This is further supported by the fact that global supply chains are considering manufacturing in India to offset geopolitical risks, especially…