India Fund: Still a Buy with Caveats

The India Fund (NYSE:IFN) is an active closed-ended fund that tracks the Indian markets and offers decent income from capital appreciation. Although its expense ratio is slightly high at 1.49%, it still presents a buy opportunity with caveats. The fund offers a unique investment opportunity for those looking to tap into India's growing economy.

India's equity capital market volumes are anticipated to exceed the current level of $46 billion next year, according to top Citi Group executives. This significant growth is primarily driven by a surge in initial public offerings (IPOs) and other forms of capital raising.

Arvind Vashistha, head of Citi India’s equity capital markets, stated that the firm has already facilitated close to $15 billion of IPOs since the beginning of 2025 and has several more in the pipeline. He expects Indian companies to raise over $20 billion through IPOs by the end of this year. Rahul Saraf, Citi India’s head of investment banking, added that the market is witnessing IPOs of different sizes and scales from companies across various sectors, including financials & fintech, infrastructure, and healthcare. The latter part of the year is expected to remain busy, with more IPOs lined up.

The investment bank has been involved in several notable IPOs, including Tata Capital, LG Electronics India, and Hexaware Technologies. Upcoming IPOs for this year include Lenskart, Meesho, Groww, and Pinelabs. Vashistha anticipates an increase in Qualified Institutional Placements (QIPs), with higher average ticket sizes to meet firms' growth ambitions. Citi India also facilitated the State Bank of India’s QIP, one of the largest transactions of this year.

The increase in market activity is also fueled by rising domestic capital, driven by higher retail investor participation and geopolitical factors. Multinational companies are listing their Indian subsidiaries to reduce debt and exposure, seeking interim liquidity. Additionally, mergers and acquisitions (M&As) have seen differentiated strategies, with foreign strategic money entering India and global MNCs evaluating options for sale. Citi India has been involved in prominent M&A transactions such as Akzo Nobel's sale to JSW Paints and Capgemini’s acquisition of WNS.

Indian companies are actively exploring acquisitions in different geographies to diversify their exposure and de-risk themselves amidst ongoing tariff wars. Saraf noted that many Indian companies have unlevered balance sheets and liquidity in the system, making acquisitions an attractive option. Private equity firms are also keen to buy or pay a premium for good assets, with domestic strategics taking a longer-term view in some cases.