Whilst the Asian economy has grown in size and importance, we have been slowly adding the single-country funds specialized in Asian countries to the international funds list. The first country we added was Japan, and much later China. What we required in order to present you with the added threat of a fund focused on a single country was a fairly large and diversified capital market that offered a portfolio manager the ability to diversify the portfolio even in just a single country. Since the Japanese and Chinese economies grew and new industries blossomed, we thought that test was met. We now think that the Indian economy and capital markets also meet our test. With this dilemma, then, we are adding three India funds to the list: Matthews India, WisdomTree India Earnings (ETF) and PowerShares India (ETF). We might add 1 or 2 other funds to the list over another few issues.

Why India?... Frequently previously when we spoke about Asia and its rapid growth we cited the twin dynamos powering that growth, China and India. Coupling the two served its purpose, but we now believe the 2 are taking on separate identities. As we've been listening and reading within the course of yesteryear 4 or 5 months, we have come to the conclusion that there are differences in the paths that China and India is going to be taking over the months ahead. Both will undoubtedly be growing rapidly (or intend to) but one is worried about too-rapid growth (China) while one other is aiming at much faster growth as time goes on (India).

To sort things out, and to get a better feel for the Indian economy and the capital market, we spoke to Sharat Shroff, the portfolio manager of the Matthews India Fund. The first point that Shroff made is that "a number of the days ahead for India (speaking of growth) may be better than what has been seen over the past two to three years." For many historical perspective, Shroff remarked that India's growth rate picked up after the us government adopted a policy of setting up the economy in the early 90's. Since that time, as more reforms were gradually introduced, growth has picked up further. By 1995, India's growth hit the high single-digits range and remained there (on average). Such growth is now taken while the benchmark.

Shroff emphasized that why is India's growth different from other emerging countries is that in large part it arises from domestic demand, not from exports or commodities. There is no large-scale overhaul that India must undergo, he remarked. What Shroff is driving at is that in the post-recession world China's trade surpluses and the U.S. deficit must shrink being that they are unsustainable. India faces no such issues.

The 2nd point advanced by Shroff is that the private sector accounts for roughly 80% of India's growth. The significance of that is that in India we are talking about businesses which can be oriented toward profits and return on capital. This is simply not always the case elsewhere in Asia. Because of the conditions, India offers the investor to be able to invest in good quality companies with solid business models.

In terms of Matthews India, Shroff said that the fund does certainly not purchase the large cap, world-renowned companies (the Indian blue chips). As Shroff put it, in the event that you compare our portfolio with the benchmark, you'll observe that two-thirds of our portfolio is composed of small- and mid-cap stocks. We act as a bit more forward-looking. What the fund is searching for are those (smaller) companies which are "participating in the country's growth and have the potential to become among the larger companies two, three or maybe five years from now."

The Indian market...We asked Mr. Shroff, what index you ought to watch to keep track of the Indian market. He answered that the Sensex is the traditional index followed. But recently, the professional community pays more focus on the S&P CNX Nifty Index.

As for valuations, the Indian market, says Shroff, is selling at a price-earnings ratio of about 15-16 times and at about 3 x book value. This is slightly above historical average valuations. Also Shroff noticed that the Indian market has traditionally been expensive compared to its emerging market peers. The premium has ranged from as low as 15% to as high as 45%. Today he puts the premium at the low end of the range.

There's some justification for the premium, he added. The return on equity for Indian firms is in the 18-20% range, which, as he use it, "is fairly robust." Another reason refers back once again to the internal sources of India's growth so that you get less volatility than you do from a "commodity producer."

That is not to say that the Indian market is not volatile. "Even although the economy may be dancing to its own tune," Shroff warned, "when foreigners were taking out money from all emerging markets in 2008, the Indian market went by way of a very severe correction. (In fact) in the last 3 or 4 years the Indian market indicates some correlation with the S&P 500." (We realize that recently to own been true of emerging markets as a whole.)

Shroff looked to the issue of volatility more than once. He was preaching to the converted. We're restricting our advice concerning the Indian funds to Venturesome investors only. This is the same policy that individuals have already been following pertaining to the pure China funds. The policy is not written in stone, but the entire world economy will have to be functioning closer to normalcy before we would consider any relaxation.

After the interview with Shroff, we were a lot more convinced that the single-country India funds belong within our fund list. Not only is India growing rapidly, but we be prepared to start to see the emergence of more investment -- worthy companies as opportunities arise. Considering the potential, you can appreciate why Asia and the emerging markets, generally speaking, have become the biggest market of the investment world's attention.