Article written by Mugunthan Siva
Co-Founder & CIO
India Avenue

In Part 1 of this series, we explored why India deserves consideration as a long-term investment destination. A young and growing population, rising household incomes, digitalisation, infrastructure development, financial inclusion and a rapidly expanding corporate sector have contributed to India’s long-term economic growth.

The next question is equally important: how might New Zealand investors choose to access the Indian equity market? The implementation matters. A global equity fund, an emerging markets fund, a passive India ETF and an actively managed India fund all provide exposure to India, but they do so in very different ways. For investors, these differences can influence long-term outcomes just as much as the decision to invest in India itself.

Four ways to invest in India

Today, New Zealand investors can generally access India’s equity market in four ways.

1. Global Equity Funds provide broad international diversification across developed and emerging markets. While most have some exposure to India, it is often only a small allocation within a much larger global portfolio.
2. Emerging Markets Funds allocate capital across many developing economies including India, China, Taiwan, Brazil and others. Although India may represent an increasing share of these portfolios, managers must balance opportunities across numerous countries and generally invest in the largest, most liquid companies.
3. Passive India ETFs and Index Funds provide direct exposure to India by tracking benchmarks such as the Nifty 50 or MSCI India. They offer a simple, low-cost solution but are largely confined to companies already included in those indices.
4. Dedicated Active India Funds focus exclusively on Indian equities and have the flexibility to invest across sectors, industries and company sizes, seeking opportunities beyond the largest index constituents.

Looking beneath the surface

New Zealand investors may assume they already have meaningful exposure to India through their global equity, Asia or emerging markets funds. While India has become a larger component of these portfolios over recent years, the reality is that most investors still own only a small number of India’s largest listed companies.

This reflects the way these funds are constructed. Global managers are responsible for allocating capital across dozens of countries and thousands of companies, while Asia and emerging market managers must balance opportunities across many different economies. Portfolio liquidity, benchmark weights and fund size naturally push managers towards India’s biggest, most liquid businesses.

The result is that investors often gain exposure primarily to India’s largest listed companies, with less exposure to smaller businesses that may also contribute to economic growth.

The differences become much clearer when comparing the depth of exposure each investment approach typically provides.

*Morningstar Median
** Average of Betashares India, Global X Nifty, VanEck Growth Leaders (India ETF’s listed in Australia)
# Global Equity benchmark assumed to be MSCI ACWI, Emerging Markets assumed to be MSCI EM, Passive India ETFs and India Avenue Equity Fund assumed to be MSCI India
@ Median Holdings x Current India Weight in their benchmark

Owning India’s three largest companies is a little like trying to understand New Zealand’s economy by owning only the three largest companies on the NZX. Important businesses are captured, but much of the broader economy, and many potential future winners, remain outside the portfolio.

Historical differences between active and passive approaches in India

Passive investing has become widely used across many developed markets where information is generally available, and companies are extensively researched.

India’s market structure is different.

While the country’s largest companies receive significant analyst attention, research coverage falls away rapidly outside the largest businesses. This may create an environment where attractive companies can remain underappreciated for extended periods, while governance risks and weaker businesses may also receive less scrutiny.

Some active managers view these characteristics as creating a broader opportunity set for research-driven investment approaches. Rather than investing according to index weights, active managers evaluate companies on their individual merits, considering management quality, governance standards, balance sheet strength, capital allocation and long-term earnings potential.

Importantly, they also have the flexibility to invest in businesses years before they become large enough to enter major benchmark indices.

Local market knowledge may be an important consideration when evaluating Indian companies. Meeting company management, understanding promoter groups and analysing industry dynamics on the ground can provide insights that are difficult to capture from financial statements alone.

This decline in research coverage may create circumstances where fundamental stock selection can play a larger role than some more heavily researched markets.

What does the evidence show?

The historical evidence reflects these structural characteristics.  Based on India Avenue research, 25 Indian flexi-cap and multi-cap funds with a full ten-year history produced average annual return of approximately 14.4% after fees over the period measured, compared with 12.5% for the MSCI India Index and 11.6% for the Nifty 50 Index. Results will vary and different time periods may produce different outcomes.

Each option covers a different part of the market. Flexi and Multi-Cap funds have a broader mandate to invest typically across large, mid and small companies¹. The MSCI India Index consist of 165 of the largest companies by market capitalisation (as of 27/07/2026), and the Nifty 50 Index tracks the 50 largest listed companies.

¹ Groww – Multi-Cap Funds vs Flexi-Cap Funds

Source: Ace MF, MSCI. Ten years to 30 June 2026. Average of 25 flexi/multi-cap funds, after fund fees and before tax

The sample is intended to illustrate historical outcomes for a selection of active Indian equity funds over the period shown and may not be representative of all active managers, funds or investor experiences. The analysis is based on funds with a full ten-year performance history.

Active management cannot guarantee outperformance relative to passive strategies, and results differ across managers and market cycles. In markets such as India, where sector leadership, earnings dispersion, and corporate governance standards continue to evolve, active approaches may have greater scope to express conviction and manage risks. This potential is not assured and depends heavily on stock picking skill, process, and discipline.

Where India Avenue fits

The India Avenue Equity Fund (IAEF) is one option available to InvestNow investors seeking dedicated exposure to Indian equities

Rather than owning a small number of India’s largest companies, the Fund typically invests across 60–80 businesses spanning multiple sectors and market capitalisations. The portfolio maintains a structural bias towards mid and smaller companies, where research coverage is often less comprehensive. These companies may offer higher growth potential but can also involve additional risks and volatility.

This broader opportunity set is supported by locally based investment managers who conduct extensive bottom-up research, meet company management teams and continually assess the quality of businesses across India’s rapidly evolving economy.

The objective is simple: to provide investors with exposure to more of India’s opportunity set, rather than simply its largest companies.

Conclusion

India’s long-term economic outlook is supported by factors such as demographics, productivity growth, manufacturing development, infrastructure investment and domestic consumption, although future outcomes remain uncertain.

For New Zealand investors, however, the decision is not simply whether to invest in India. It is also how to access that market.

Global equity funds and emerging markets funds provide diversified exposure, although their allocation to India may be limited relative to dedicated India-focused strategies. Passive India ETFs offer low-cost exposure to the largest listed companies but are largely confined to businesses that have already entered benchmark indices.

A dedicated active India strategy seeks to provide broader exposure across sectors, industries and company sizes, combining rigorous fundamental research with local market expertise to identify businesses benefiting from India’s structural transformation.

As India continues its rise towards becoming one of the world’s largest economies, investors may find that the breadth of their exposure is just as important as the decision to invest there in the first place. Investors considering exposure to India may wish to consider not only whether they have exposure, but also the type and breadth of that exposure.

If you’d like to learn more about the India Avenue Equity Fund, please refer to the Product Disclosure Statement and other disclosure material available on India Avenue landing page on InvestNow.

Disclaimer:

• A copy of the PDS for the India Avenue Equity Fund (H Class) can be obtained by writing to India Avenue on IA@indianavenue.com.au or by visiting www.indiaavenue.com.au.
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