A $9 billion emerging markets fund run by Vontobel Asset Management has a quarter of its money in a handful of Indian stocks, including ITC and Hindustan Unilever - an unusual bet at a time when the country's economic woes have prompted many investors to flee.
Rajiv Jain's Virtus Emerging Markets Opportunities Fund is also notable for his decision to largely shun China, citing worries about China's banking sector, which he calls "a complete disaster".
Jain said he shares concerns about India but his bets are mainly consumer products firms able to generate some of the fastest earnings growth in the world on the back of a growing middle class.
"It should not be construed as being bullish on India," he told Reuters in an interview. "It's four or five names."
"It's a function of what the opportunity set is globally. If you look at the world today, it's not easy to find companies that can deliver 20 percent-odd EPS growth," said Jain, 45, who manages $30 billion for New York-based Vontobel.
Beset by slowing growth and high inflation, India's woes have been exacerbated by its crashing currency, and foreign investors sold a net $1.5 billion of Indian shares in the four weeks to July 12.
By contrast, the fund's 27 percent weighting for India is up from 24 percent at the end of last year, the highest in the world among funds with $1 billion or more under management, data from Thomson Reuters Lipper showed. The fund's benchmark has just a 6.8 percent weighting for India.
Most of the investment is in five stocks: cigarette maker ITC, Hindustan Unilever, Nestle India, Asian Paints and lender HDFC. Jain said his top India holding, ITC, had a high return on capital and was in a business "almost impossible" to break.
"If we are comfortable buying Starbucks at 27 times earnings... what's wrong with ITC trading at 27-28 times earnings at similar growth rates?" he said.
Indian consumer sector stocks are forecast to grow per share earnings by 19 percent in the next fiscal year and their shares trade at 30 times forward 12 months earnings, according to Thomson Reuters Starmine.
That compares with an average of 14.6 percent EPS growth for Asia Pacific consumer sector stocks which have a multiple of 17.8 times forward 12 month earnings.
Other areas Jain likes are Mexico and Brazil, with Mexico accounting for 13 percent of the fund's assets and Brazil accounting for 10 percent.
But China has fallen out of favour for Jain, who has helped Vontobel grow into a $42 billion money manager from $400 million in 2002.
China, which has 18.4 percent weight in his emerging market fund's benchmark, was missing from his top-10 country exposure at the end of June. Allocation to Hong Kong also fell to 6.8 percent from 7.6 percent last quarter.
"Anything, which has been a beneficiary of China or has a lot of exposure to China, we actively want to avoid," Jain said.
He said he is wary of Chinese bank's accounting practices, poor disclosures and a loan to deposit ratio that may have spiked to 120 percent. A number of smaller banks are also dependent on wholesale funding, currently under pressure given government crackdown on risky lending.
If bad loans mount, China could face a situation similar to the late 1990s when Chinese banks were close to "technically bankrupt", he said, saying that much will depend on how well the government can handle the current crisis.
"The movie (then) was not playing in public. Now, it will be publicly screened. It's a lot more difficult," he said.