Many experts think the economy will outshine China in coming years. “In the last year, the MSCI India index is up by 22%, whereas China is up by only 5.8%,” says Allan Conway of Schroders in The Daily Telegraph. “China may have better short-term prospects, but India is less developed and so has further to grow.”
A new government is helping India’s development gather speed by focusing on sorting out its infrastructure. But there is still much to do. “India remains a very rough diamond,” says Darius McDermott of Chelsea Financial Services in The Daily Telegraph. “It remains a decade behind China – in may parts of the country roads are truly catastrophic. Energy supply is a perennial problem, as is the supply of skilled workers.” However, those huge infrastructure needs, alongside the demands of a growing, and increasingly affluent, middle class, provide plenty of investment opportunities for India-only funds, such as Insynergy Absolute India (0117-900 9000).
The fund is operated by Reliance Asset Management, one of the largest firms in India. Fund Manager Ashish Mehta has 15 years of investment experience and believes he can find firms on “very attractive valuations that can grow at 20% to 25% each year”, says Mark Dampier in The Independent. As an added bonus, the fund can also short shares in companies it believes are overpriced, allowing it to exploit both ends of India’s market. This is the first time Reliance has launched a fund for the British market. But “the combination of Reliance and one of Asia’s best growth stories” makes it a potential winner, says Dampier.
That said, pure plays on India are still for the brave. “India shows a lot of promise, but there are endemic problems,” says McDermott. Regulation is not on the same level as in the West and, as a developing economy, there is a larger element of risk investing here. Those who favour a more cautious approach should consider getting exposure through a broader fund. McDermott likes the Allianz BRIC fund (020-7065 1407).