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 www.h-l.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Mortgage Advisor - OTE £95,000

    £40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...

    SThree: Trainee Recruitment Consultant

    competitive: SThree: Are you passionate about sales?Do you have a keen interes...

    Recruitment Genius: Loan Adviser - OTE £30,000

    £17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Day In a Page

    Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

    EU 'family' needs to forgive rather than punish an impoverished state

    An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
    Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

    Gaza, a year on from Operation Protective Edge

    The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
    How to survive electrical storms: What are the chances of being hit by lightning?

    Heavy weather

    What are the chances of being hit by lightning?
    World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

    World Bodypainting Festival 2015

    Bizarre and brilliant photos celebrate 'the body as art'
    alt-j: A private jet, a Mercury Prize and Latitude headliners

    Don't call us nerds

    Craig Mclean meets alt-j - the math-folk act who are flying high
    How to find gold: The Californian badlands, digging out crevasses and sifting sludge

    How to find gold

    Steve Boggan finds himself in the Californian badlands, digging out crevasses and sifting sludge
    Singing accents: From Herman's Hermits and David Bowie to Alesha Dixon

    Not born in the USA

    Lay off Alesha Dixon: songs sound better in US accents, even our national anthem
    10 best balsamic vinegars

    10 best balsamic vinegars

    Drizzle it over salad, enjoy it with ciabatta, marinate vegetables, or use it to add depth to a sauce - this versatile staple is a cook's best friend
    Wimbledon 2015: Brief glimpses of the old Venus but Williams sisters' epic wars belong to history

    Brief glimpses of the old Venus but Williams sisters' epic wars belong to history

    Serena dispatched her elder sister 6-4, 6-3 in eight minutes more than an hour
    Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

    Greece referendum

    Greeks say 'No' to austerity and plunge Europe into crisis
    Ten years after the 7/7 terror attacks, is Britain an altered state?

    7/7 bombings anniversary

    Ten years after the terror attacks, is Britain an altered state?
    Beautiful evening dresses are some of the loveliest Donatella has created

    Versace haute couture review

    Beautiful evening dresses are some of the loveliest Donatella has ever created
    No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

    No hope and no jobs in Gaza

    So the young risk their lives and run for it
    Fashion apps: Retailers roll together shopping and social networking for mobile customers

    Fashion apps

    Retailers roll together shopping and social networking for mobile customers
    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy