Go where Asia is growing with New India

Reasons for optimism include the Indian government's attempts to tackle inflation and the country's finances, rebuild local business confidence, speed up decision making and get infrastructure projects up and running.

India is also set to be the world's most populous country by 2050. The lower oil price, meanwhile, is helping Indian companies to reduce their costs and has boosted consumer demand. It has also reduced India's current account and fiscal deficits, meaning the country should be able to deal with tighter financial conditions if the dollar appreciates following US interest rates rises.

The Indian central bank's ongoing monetary easing and its determination to see banks pass on lower borrowing costs should also support consumption. Ayesha Akbar, portfolio manager at Fidelity, says: "In the longer term, if prime minister Modi can deliver economic reforms and greater foreign investment in the country, India represents an attractive choice."

However, even after the market correction in April, Indian share valuations are on the expensive side, and in the short term there could be volatility due to slowing growth in China. There is also no guarantee that the Indian government will be able to push through all its reforms, in particular those relating to infrastructure. So, it helps if you can find a discounted way into Indian stocks.

In steps IC Top 100 Fund New India Investment Trust (NII) which has beaten its benchmark, MSCI India, over one, three and five years, as well as sector peer JPMorgan Indian (JII).

New India is on a discount to net asset value (NAV) of 8.4 per cent, and if its outperformance continues and Indian markets do well, this could tighten.

The investment trust's managers invest in companies they think offer good value. They estimate a company's worth by assessing quality and price. They define a company's quality with reference to its management, business focus, balance sheet and corporate governance record. When calculating a company's price the trust's managers look at key financial ratios, the market peer group and business prospects.

New India's managers favour consumer stocks and the portfolio has substantial exposure to banks, which they think will benefit over the long term from the expansion in the wealth of the middle class. Their emphasis is on private sector rather than public sector banks.

The trust holds local and multinational consumer staple companies including Hindustan Unilever (HINDUNILVR:NSI), ITC (ITC:NSI) and Godrej Consumer Products (GODREJCP:NSI).

New India is a single country fund so it has a higher risk profile as you are more concentrated on the fortunes of one area. However, if this is the start of a multi-year earnings growth cycle, the Indian market could still provide healthy earnings-based returns, and there is still some value in medium- and smaller-sized companies, according to analysts at FundCalibre. China is India's second-biggest destination for exports but in 2014 China only accounted for around 4.2 per cent of total Indian exports.

So, if you have a high risk appetite and can stomach volatility along the way, and a long-term time horizon that allows you to wait for India's potential to come to fruition, New India Investment Trust looks like a good way to tap into Asian growth at a discount. Buy.

Source: Morningstar & *Aberdeen

Performance

Source: Morningstar as at 9 November 2015

Top 10 holdings, as at 30 September 2015 (%)

Sector breakdown (%)