India is fast becoming the emerging market to watch as the government prioritises pro-reform measures, according to Baring Asset Management.

India is overtaking China as Asia's powerhouse, having achieved a 10 per cent year-on-year market growth in 2014, according to Baring Asset Management.

Investors are hopeful about India's prospects under Modi's BJP party. The recent government budget pointed towards long-term investing, with a marked shift from current to capital expenditure, and a bulked-up pot for infrastructure spending – the amount dedicated to road investing rose almost three-fold to INR827 billion (from $4.85 billion to $13.36 billion).

Meanwhile, the current account deficit has reduced from almost 5 per cent to 1.5 per cent of GDP over the past 18 months, Barings said. Aside from the healthier fiscal status, favourable inflation figures are expected to prop up India's corporate earnings.

“India has become one of the better performing emerging markets and the Reserve Bank of India cut its main repurchase rate by 0.25 percentage point to 7.5 per cent on 4 March, the second rate cut this year,” said Barings' head of Indian equities, Ajay Argal, in a statement.

“As inflation curbs, we expect corporate earnings to improve, which will help to boost earnings growth of the market as a whole. There is obviously room for further cuts but this is dependent on factors such as the oil price and large currency movements.”

Argal estimates the nation's banking industry will expand a further 20 per cent over the next three-to-five years as efficient private players claim a larger slice of the pie. This is reflected in the sector composition of many India-focused funds, including the Baring India Fund, which is in the overweight camp for financials.

“Similarly, looking at consumer discretionary, automobile manufacturers such as Maruti Suzuki India has an expected volume growth in excess of 10 per cent over the next three-to-five years. These are the type of stocks where earnings have languished over the last few years but now that the economy is improving, and demand is coming back, we expect volume growth to return,” added Argal.