Against a backdrop of lacklustre returns from many emerging markets, India is looking more interesting, said Rajendra Nair and Rukhshad Shroff of JP Morgan Asset Management.

“The Indian government has made significant policy changes as GDP growth dipped to a decade low of 5 per cent for 2012-13 compared with its 15-year average of 7.3 per cent a year,” said Nair.

“India had been suffering from political deadlock, which was having an adverse impact on the economy, with knock-on effects for Indian companies. We now feel an economic recovery is made more likely by the measures that have been undertaken thus far,” he added.

This view is echoed by Maarten-Jan Bakkum, senior emerging market equity strategist at ING Investment Management. He believes that although India has a large current account deficit, it can still buck the downward trend in emerging markets and provide opportunities for investors.

"Trade and current account deficits in India have started to narrow due to the current weak prices of domestic demand growth and its competitive currency. The government has also kept a fiscal consolidation focus and with inflation coming down, the central bank should be able to continue cutting interest rates. The recent decline in the price of oil is also good news for India, due to its dependence on the fuel source," said Bakkum.

During 2012-2013, India's economy grew at its weakest pace for more than a decade, with high inflation and interest rates helping to undermine consumer spending and reduce business investment.

While inflation has fallen from its peak of more than 10 per cent in 2010 and is now at a more manageable level of 5 per cent, interest rates remain high at around 8 per cent. Although some experts have argued that lower inflation now paves the way for a reduction in interest rates to encourage growth, the Reserve Bank of India has warned that the upside risks of inflation and a high current account deficit mean there is little room for further monetary easing.

Shroff believes that while there are not always parallels between economic and stockmarket performance, the signs for investors in Indian companies are encouraging.

“Measures of valuing companies’ shares, such as price-to-earnings ratio and price-to-book value, are below their long-term averages, meaning shares can be bought relatively cheaply, while analysts expect strong growth in company earnings over the coming year. Given the current opportunity to buy growing companies at below-average valuations, we are optimistic that Indian equities have the potential to perform significantly better over the next few years than they have in the recent past,” said Shroff.

Despite this optimism, the short-term outlook for equities looks less positive, with stockmarket prices in India recently tumbling.

Last week, India's benchmark indices suffered their biggest single day percentage fall in 14 months.

The BSE Sensex fell 2.25 per cent (455.10 points) to 19,760.30, while the NSE Nifty tumbled 2.26 per cent (138.10 points) to 5985.95.