The now-8 per cent interest rate is a small step closer curbing the joint threats of high CPI inflation and a declining rupee.
Ahead of this year’s general election, which needs to take place by May, investors are keeping a keen eye on the country's prospects, which are due an upturn in fortunes.
So is the tide set to turn for Indian investors even though the fears of Raghuram Rajan, the Reserve Bank of India’s governor, are thought to be worsening?
Ignis's Gordon McKay, who runs the International Asia Pacific fund, said the country is craving more decisive action.
He says following one of the most rapid declines in growth post-crisis, there has been little evidence of such action by the incumbent, Congress-led, party. As such he seems encouraged by the support building for the main opposition party, the BJP – a win for whom would be welcomed by the market.
India is a key overweight position in the fund, alongside his other north Asian exposure citing reasons of greater correlation with the US and cheaper valuations than in South East Asia and Australia.
"In addition to any politically driven change that may take place, India’s economy has already undergone a significant adjustment phase, unlike some of the South East Asian economies.
"For example, India has witnessed a significant turnaround in its trade deficit. Part of this turnaround has been driven by a policy led restriction on gold imports but there has still been a material improvement in the underlying trade balance. Similarly, credit growth has already slowed dramatically and is now growing at a rate close to nominal GDP growth."
He is also bullish on Korea and China and believes South East Asia is relatively overvalued and as such is underweight the region, in spite of its longer term structural opportunities.
Elsewhere Sharat Shroff, fund manager at Matthews Asia, believes the country is poised for a comeback – irrespective of the impending election.
He runs the Pacific Tiger and India and co-manages the Asia Growth and Asia Focus strategies, and thinks a key investment characteristic of India is its uncorrelated growth to other markets.
"When you look at EPS growth, that is one dimension of how well an economy or a company is doing. But it is the variability in that EPS growth that becomes important because as an investor one of the few things you want to look at is growth, and possibly also diversification to come with it.
"So with India you are getting EPS growth which is fairly competitive but then you are also getting that EPS growth with much lower volatility – and that is what I think makes it somewhat interesting."
McKay believes that apart from the fiscal deficit – now higher than 5trn rupees or 94 per cent of its target – much of the country’s necessary macro adjustment has taken place.
"From here the Indian economy has good potential, particularly if there is a developed market-led export recovery," he adds.
