A star of the emerging markets in recent years, India has had a rougher ride so far in 2025.
Tariff concerns, fears of high valuations and tensions with Pakistan have all combined to knock the country’s stock market off course.
The MSCI India index is down by around 2 per cent for 2025 in the year to date in sterling terms, putting it behind China, Japan, Asia, the UK and Europe.
Meanwhile, funds in the Investment Association’s India/India Subcontinent sector have fallen by a heftier 8.4 per cent on average.
And yet there is much to like even now.
The Indian market has delivered enormous returns over the past five years, at least in sterling terms. Indian equities actually fared better than most other markets in April, when the trade war sell-off took hold, and the arguments for investing in the region (from strong demographics to economic reforms) have not gone away. But single-country funds carry additional risks.
The leaders
The leading India funds of the past five years have all delivered gains ahead of the 121.7 return from the MSCI India index over the same period, while the return from the S&P 500 was 80.8 per cent. They are: India Capital Growth (IGC), Ashoka India Equity (AIE), Jupiter India Select (LU0946220000), Matthews India (LU0594558263), Ashoka WhiteOak India Opportunities (IE00BHPGG474), Nomura India Equity (IE00B3SHG055), Liontrust India (GB00B1L6DV51), Alquity Indian Subcontinent (LU1049768085), GS India Equity Portfolio (LU1268608111), Franklin India (LU0768358961) and FSSA Indian Subcontinent All-Cap (GB00BDG1BQ05).
The top two performers, India Capital Growth and Ashoka India Equity, both focus on small- and mid-cap companies in pursuit of strong returns. The Ashoka trust has around half of its portfolio in smaller companies and 13 per cent in mid caps, while IGC simply states that it has a small and mid-cap mandate.
In a market with lots of potential for growth this is a compelling approach, and it’s a dividing line among the top performers.
Some funds, such as India Capital Growth, don’t specifically break down their portfolio by market cap, but as our second charts shows, those that do can differ markedly.
Note that Ashoka and Alquity Indian Subcontinent have a pronounced small-cap allocation, while Matthews India and Liontrust India have a big focus on larger companies.
Exposure to smaller companies has helped to drive strong returns in recent years, but it can of course be a double-edged sword.
When it published its latest financial results in late March, for example, IGC noted that small and mid cap stocks had taken the greatest hit during a difficult few months for Indian equities.
That trend looks to have continued for the trust, with it being one of the worst performers out of the IA and AIC India/Indian Subcontinent sectors so far in 2025, with a share price loss of around 12 per cent.
Sticking with India Capital Growth and Ashoka India Equity, there are some notable differences as well as similarities between the two. The former has just 38 holdings while the latter, which has substantially expanded its number of positions as the trust itself has grown, now has 145.
But neither manages to make hugely punchy bets, with ICG’s biggest position accounting for 6.1 per cent of the portfolio. Combined, ICG’s top 10 holdings represent around 42 per cent of its assets.
A degree of diversification is also evident elsewhere. No fund in our sample has as much as half its portfolio in the top 10.
This offsets a key risk for some single-country funds, of the kind found with the dedicated Vietnam investment trusts: that the market is concentrated around a handful of stocks, meaning the funds themselves have very big bets on individual companies and are overly weighted to this group.
The fund from our sample with the biggest single bet is Nomura India Equity, which has around 10 per cent of its portfolio in its top holding, ICICI Bank.
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Sector preferences
Last year, industry commentator Holly Mackay of Boring Money, when discussing the popularity of funds such as Jupiter India (GB00B4TZHH95), noted: “If we compare the largest holdings in best-selling India funds to China funds, India is a story of oil, ciggies and banking, whereas China is about entertainment, social media and shopping.”
This quote, which partly refers to Jupiter India’s top position, tobacco stock Godfrey Phillips, is not representative of India funds as a whole. However, as the third chart shows, there are some common themes.
The chart, which includes a different, slightly better-performing Jupiter fund with a very similar portfolio, emphasises that almost all the funds in our sample have at very least a quarter of their assets in financials (which make up almost a third of the MSCI India index).
Ashoka India Equity is actually an outlier here, with less than a fifth of its portfolio in financials.
In general, it tends to have fairly modest allocations to each sector, with its second-biggest sector weighting, consumer discretionary shares, accounting for around 13 per cent.
ICG, which breaks out its sector weightings differently to peers and is excluded from the chart, has around 15 per cent of its portfolio in banks alone. Other allocations of a decent size are to industrials, auto and related companies, consumer staples and consumer discretionary.
Looking at the sample as a whole, consumer discretionary, information technology and healthcare are the sectors that tend to show up most prominently after financials.
