Investors looking to make a play in India should buy this cheap fund

India is well and truly back in fashion. The stockmarket has gained 25% in six months as investors rattled by last year’s turbulence have come storming back. In 2012 India’s growth rate slowed to under 6% and structural reforms to boost growth seemed to have been put on ice.

But now the outlook is improving. “Consumption and investment are showing early signs of bottoming out,” says Morgan Stanley. What’s more, inflation has eased to a three-year low, providing scope for the central bank to cut interest rates.

Reforms also appear to be back on track. There has been a “genuine effort” to trim the government’s subsidy bill, judging by revisions to the pricing regime for diesel, says Royal Bank of Scotland. In December, measures were finally passed to liberalise the retail sector by allowing investment from foreign supermarket chains. Goldman Sachs reckons that the reforms can lift growth above 7% in 2014.

Future governments will have to keep liberalising the highly regulated economy “in the face of stiff political opposition” if India is to fulfil its long-term potential, says Victor Mallett in the FT. There’s still plenty of ground to make up: in 1950 India and South Korea had the same GDP per capita. Now the latter’s is 22 times bigger.

Despite the market’s sharp rise, MoneyWeek’s favourite play on India’s development, the New India Investment Trust (NII), still looks worth tucking away on a discount to its net asset value of 11%.

MoneyWeek magazine

Latest issue:

Magazine cover
Party's over for Putin

The only portfolio safe from Russia's rout

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Hedge fund manager Hugh Hendry: 'It felt like the sun rose only to humiliate me'

In a series of three short videos, Merryn Somerset-Webb talks to Hugh Hendry, manager of the Eclectica hedge fund, about everything from China to the US, Europe, and Japan.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


19 December 1932: BBC World Service begins

The first royal Christmas message by George V gave the fledgling World Service an early boost six days after it was founded in 1932.