How to invest in India
India is a country global emerging markets experts keep a close eye on.
After China, it is presently the fastest growing economy in the world.
As the planet's largest democracy and second most populated nation, with 1.2bn people, it is constantly changing and new themes are emerging all the time.
Lifestyles, for example, are in many cases radically altering. It has one of the youngest populations in the world, with about half aged below 26.
Investors point out that there are an increasing number of people using credit cards, buying mobile phones, eating out, shopping in big department stores and spending their money on healthcare, travel and luxuries.
But one of the most significant points is the changing demographics of India, where wealth is gradually filtering down to rural and traditionally low-income sections of society.
In fact, the middle class is now said to make up 200m people and this is expected to swell to 500m over the next eight years.
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Between 2007 and 2010, some 71m people are expected to swell the working age demographic. The gross domestic product of India has enjoyed phenomenal growth, from £16bn in 1980 to more than £500bn today.
While India is ahead of China - the other big powerhouse in Asia - in terms of its services industry, it is at least 10 years behind with infrastructure development.
However, this is starting to change and $320bn of infrastructure investment has been targeted between now and 2012 with projects in place for improving roads, ports, telecommunications, airports, railways and power.
Volatility and challenges
2008 was not a good year for Indian shares. Coupled with the nation's considerable growth potential are its challenges. Like all fledgling economies it is a highly volatile sector to invest in, so be prepared for a bumpy ride.
In 2008, the Sensex plummeted by a massive 53% in local currency terms.
Back in 2006, just over a year prior to the onset of the financial crisis, when markets around the globe tumbled in May and June, the Sensex index collapsed by almost 30% in just five weeks.
But by end of November 2009, India had once again strengthened its reputation as one of the world's strongest emerging markets by revealing annual growth of nearly 8%.
How to invest?
India funds
There is a limited selection of pure India funds but for some the growth has been exceptional. It is important to note that given the volatility of the region, investors should not be over-exposed in their portfolio. India has a very good long-term story, this is for high risk investors only, when a market can shoot up so quickly, so it can also come down just as fast, if not faster
Funds commonly recommended for the most adventurous of investors include Jupiter India, and Neptune India. Other portfolios worth a look include the HSBC GIF Indian Equity fund and Fidelity India Focus. The JPMorgan Indian Investment Trust, is another option.
Exchange Traded Funds
Recent years have witnessed a number of emerging market focused exchange traded funds (ETFs) come to the market, some of which invest in India, offering investors a relatively straightforward route of exposure.
Like traditional tracker funds, ETFs aim to mimic the performance of a particular market or index such as the FTSE 100 and like a traditional tracker their value is determined by whether or not the index rises or falls.
But ETFs differ in that they are traded like individual stocks, on an exchange such as the London Stock Exchange and can be bought and sold through brokers in the same way as any other listed stock.
For example iShares, has its S&P India Nifty 50 index fund listed the Nasdaq stock exchange, designed to track the S&P CNX Nifty index, which consists of the 50 largest and most liquid Indian firms listed on the National Stock Exchange of India. Another popular fund is the Lyxor ETF MSCI India, from French banking giant Société Générale.
Read our full guide to ETFs here
Emerging market funds
Another way in is to buy a generalist emerging markets fund which invests in a spread of regions. Often recommended funds include Allianz RCM Bric Stars, which invests predominantly in Brazil, Russia, India and China. There is also the iShares FTSE Bric 50, an ETF offering exposure to the same regions.
Other often recommended generalist emerging market portfolios with good exposure to the Indian market are First State Global Emerging Markets Leaders, Baillie Gifford Emerging Markets and JPMorgan Emerging Markets for investors who prefer this route.
Updated November 2009, Philip Scott, This is Money
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