Whilst the Asian economy has grown in proportions and importance, we've been slowly adding the single-country funds specialized in Asian countries to our 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 dedicated to just one country was a reasonably large and diversified capital market that offered a portfolio manager the opportunity 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 believe that the Indian economy and capital markets also meet our test. With this issue, then, we're adding three India funds to your list: Matthews India, WisdomTree India Earnings (ETF) and PowerShares India (ETF). We may add one or two other funds to the list over the following few issues.

Why India?... Frequently in the past once we spoke about Asia and its rapid growth we cited the twin dynamos powering that growth, China and India. Coupling the 2 served its purpose, but we now believe the two are dealing with separate identities. As we have been listening and reading on the course of days gone by four or five months, we attended to the conclusion there are differences in the paths that China and India is likely to be overpowering the months ahead. Both is likely to be growing rapidly (or intend to) but one is worried about too-rapid growth (China) while the other is aiming at even more quickly growth later on (India).

To sort things out, and to obtain 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 initial point that Shroff made is that "a few of the days ahead for India (speaking of growth) may be better than what's been seen over the past 2 to 3 years." For a few historical perspective, Shroff noticed that India's growth rate found after the us government adopted a policy of opening the economy in the early 90's. Ever since then, as more reforms were gradually introduced, growth has acquired further. By 1995, India's growth hit the high single-digits range and remained there (on average). Such growth is currently taken while the benchmark.

Shroff emphasized that why is India's growth distinctive 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 has to 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 since they will be 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's that in India we're discussing 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 provides the investor to be able to spend money on high quality companies with solid business models.

For Matthews India, Shroff said that the fund does not necessarily spend money on the large cap, world-renowned companies (the Indian blue chips). As Shroff use it, if you compare our portfolio with the benchmark, you'll notice that two-thirds of our portfolio is composed of small- and mid-cap stocks. We try to be a little more forward-looking. What the fund is looking for are those (smaller) companies that are "participating in the country's growth and have the potential to become one of many larger companies two, three or perhaps five years from now."

The Indian market...We asked Mr. Shroff, what index one should watch to keep track of the Indian market. He answered that the Sensex is the original index followed. But in recent years, the professional community pays more focus on the S&P CNX Nifty Index.

In terms of valuations, the Indian market, says Shroff, is selling at a price-earnings ratio of about 15-16 times and at about 3 times book value. This really is slightly above historical average valuations. Also Shroff remarked that the Indian market has traditionally been expensive in comparison 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 lower end of the range.

There is some justification for the premium, he added. The return on equity for Indian firms is in the 18-20% range, which, as he put it, "is very robust." Another reason refers back to the inner sourced elements of India's growth so you get less volatility than you do from the "commodity producer."

That's not to say that the Indian market is not volatile. "Even though the economy might be dancing to its own tune," Shroff warned, "when foreigners were pulling out money from all emerging markets in 2008, the Indian market went via a very severe correction. (In fact) within the last 3 or 4 years the Indian market shows some correlation with the S&P 500." (We find that recently to own been true of emerging markets as a whole.)

Shroff considered 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 people have been following pertaining to the pure China funds. The policy is not written in stone, but the world economy would have to be functioning closer on track before we would consider any relaxation.

Following the interview with Shroff, China Fonds we were much more convinced that the single-country India funds belong inside our fund list. Not just is India growing rapidly, but we expect to see the emergence of more investment -- worthy companies as opportunities arise. Taking into consideration the potential, you are able to appreciate why Asia and the emerging markets, in general, have become the biggest market of the investment world's attention.