Investors are taking an interest in Indian stocks as “high-risk, high-return” investments gain favor in a country where interest rates are virtually zero, stock prices seesaw and deposit protection will soon be curtailed.

The aroma of Indian curry recently wafted through an office conference room in the high-rise Coredo Nihombashi building, where more than 70 people, including sales managers from Japanese brokerages and banks, were attending a luncheon seminar on Indian stock investment trust funds hosted by Merrill Lynch Japan Securities Co.

Naganath Sundaresan, the president and chief investment officer of DSP Merrill Lynch Fund Managers Ltd. in India, told the gathering that India’s economic growth is expected to continue, pointing to continued upgrading of infrastructure, including expressways and railroads, and consumption that is being driven by the middle class.

He also said government expenditures in areas including roads, electricity, oil and gas, communications, airports and harbors are expected to rise in the next three years.

“Although India is an Asian nation (as is Japan), it’s still seen as a far-off country,” said an unidentified person in charge of investment at another foreign fund management company in Japan. “So it’s good (for investors) to hear reports directly from an Indian taking charge of fund management because they can get a better understanding of India.”

Many say Japan is climbing out of its prolonged economic doldrums, but its weak banks are still offering interest rates of only about 0.02 percent on ordinary savings deposits, and the government is set to cap its unlimited guaranteed protection on those deposits at 10 million yen, no matter the size, starting April 1.

In speaking about India, Sundaresan said the country was ranked 10th in the world in gross domestic product in 2003 and is second to China in terms of speed of GDP growth.

He said foreign outsourcing of jobs to the Indian software industry is well known but the practice is spreading to other sectors, too, including pharmaceuticals, automobiles and engineering, due to low costs and a skilled labor force.

Many Japanese institutional investors have had bitter experiences investing in newly emerging markets, including Russia and Argentina. But six Indian stock investment trusts targeting individuals have been established since last autumn.

“Almost all of the people who came to buy (trust funds) specified an Indian stock investment trust, and many were women in their 20s to 40s,” said Masaya Kashioka, deputy manager of PCA Asset Management Ltd.

“There are surprisingly quite a few purchases made through online brokerages,” said HSBC Asset Management Director Haruhiko Sakamoto. “Those who are experienced in investment trusts are choosing India.”

Japanese brokerages, including Nomura Securities Co., often use beautiful images such as the Taj Mahal in materials promoting Indian investment products. But the real lure of the country is its population of more than 1 billion and a wealth of human resources who excel in English, science and mathematics.

Unlike China, which has been growing as “the factory of the world,” India is expected to achieve progress in areas such as information technology.

Outsourcing is on the rise, especially from the United States, as India’s geographical advantage allows those with call centers there to operate 24 hours a day.

However, market analysts also say that, as with any investment, people must remain cautious about the risks, and the risks in India include its fiscal deficit and tense nuclear relations with neighboring Pakistan.

But that shouldn’t deter retirees, said Takashi Shimada, president of the Indian Business Center.

“Although India isn’t expected to see rapid growth like China, the country is still worthwhile for consideration by people thinking about managing part of their money in retirement on a long-term basis,” Shimada said.

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