The Analyst: Don't run away from the Indian tiger

India is the second-largest country in the world in terms of population (behind only China) and the seventh-largest in terms of land mass. It has 36 cities with populations of more than a million people in each, and is forecast to be the most populous country in the world by 2050.

It is becoming increasingly wealthy and has the largest English-speaking population in the world with a huge educated middle class. It is clearly a massive investment opportunity, so you might wonder why there are hardly any Indian funds available.

But this is gradually being addressed, and one new launch is the New Star Indian Equity Fund. New Star has taken a slightly unusual route by in effect sub-contracting the management of the fund to Tata Asset Management. Tata is a huge Indian conglomerate – many of you will know it from its purchases of Corus (formerly British Steel) and more recently Jaguar and Land Rover. It has operations in 54 countries across six continents, and accounts for an amazing 3 per cent of the entire Indian economy and 5 per cent of its exports. As you might imagine from these statistics, Tata is the largest private employer in India.

The investment division, Tata Asset Management, is one of the fastest-growing investment houses in India, currently running approximately $7bn (£3.6bn) for more than two million investors. The division already manages a number of funds for Indian nationals with, I must say, very impressive track records.

The managers believe they have an investment edge through the sheer depth of research they do within the Indian market. They look to exploit opportunities created by a fast-growing economy without losing sight of stock valuations. This discipline is important, because it is easy to get carried away in such situations, to overpay drastically and then suffer a big disappointment.

Tata's 18-strong investment team sift through some 4,000 stocks on the Indian market and bring this list down to a manageable universe of about 400 companies. From this, a focused portfolio of 35 to 40 shares will be selected. They tend to invest in larger companies (that is, those valued above $1bn). The New Star fund will be about 75 per cent-invested in this area.

When I visited Tata's offices in Mumbai, I was struck by the team's extremely high standards of professionalism and ethics. In my opinion, they would put most Western companies to shame. Risk management is high on the agenda, but this will not be a closet indexer of the Indian stock market; Tata will take calculated risks in an effort to outperform the market.

Without doubt, India has huge potential. It has a superb demographic profile – a large part of the population are young people – which over the long term means that it could be even more successful than China. However, there are problems – and infrastructure and power supplies are two very obvious ones.

Remarkably for such a large country, India should be self-sufficient in food. However, poor infrastructure means that 25 per cent of foodstuffs rot before they get to their final destination. A massive road-building programme is under way across the nation, with about 7,300 kilometres under construction and due for completion in the next year. Furthermore, power generation capacity needs to be increased – India is producing 9 per cent less electricity than current demand, and 78 million homes don't have electricity.

Finally, inflation is rearing its ugly head. Fortunately, the Reserve Bank of India has been far more proactive than most emerging-market banks and has raised interest rates in response. However, inflation could still present a significant risk in future.

It is vital that investors remember that India is neither a one-way bet, nor a short-term one. Volatility should be expected, and at times it will be extreme, but true long-term investors with cash to spare should probably view sharp falls as an opportunity to top up their investment. India also makes a good area for regular savings as, during periods when the market is low, you can gradually pick up units at a lower price.

In my opinion, New Star has scored an impressive coup by getting Tata to manage this fund. Not many people in the world have much experience of investing in the Indian stock market, but Tata are the kind of group you'd back to succeed. It is imperative that an Indian investment be held with at least a 10-year time horizon – short-term traders should beware.

The New Star Indian Equity Fund is currently in an offer period; you can buy it for a fixed price of 500p per unit until 27 June.

Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Marketing Services Manager - (communications, testing, DM)

    £32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

    Guru Careers: Finance Account Manager

    £Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

    Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

    £40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

    Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

    £45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

    Day In a Page

    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas
    La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

    Deaf community outraged by La Famille Bélier

    The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
    10 best high-end laptops

    10 best high-end laptops

    From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

    The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
    Susie Wolff: A driving force in battle for equality behind the wheel

    Susie Wolff: A driving force in battle for equality behind the wheel

    The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
    Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

    'No abs Adam' plans to muscle in on Usain Bolt's turf

    After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
    Calls for a military mental health 'quality mark'

    Homeless Veterans campaign

    Expert calls for military mental health 'quality mark'
    Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

    Meet Racton Man

    Analysis shows famous skeleton was a 6ft Bronze Age superman
    Garden Bridge: St Paul’s adds to £175m project’s troubled waters

    Garden Bridge

    St Paul’s adds to £175m project’s troubled waters
    Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

    Stuff your own Christmas mouse ornament

    An evening class in taxidermy with a festive feel
    Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

    Joint Enterprise

    The legal doctrine which critics say has caused hundreds of miscarriages of justice
    Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

    Freud and Eros

    Love, Lust and Longing at the Freud Museum