UK-BASED Foreign and Colonial is launching a Europe-domiciled, open-ended India fund. The Indian Investment Co (SICAV), which has yet to obtain authorisation for retail promotion in Hong Kong, is aimed primarily at professional investors seeking capital growth from exposure to Indian equity markets. Equity funds in Indian stocks traditionally have been closed-end investment trusts with a limited unit or share size, but the Foreign and Colonial fund is an open-end vehicle. The fund manager, however, expected to cap the unit size of the fund at US$100 million until fully invested, when new units will be available. Manager Sanjit Talukdar said: ''The fund will be invested equally in highly liquid, large-cap stocks and less liquid, undervalued stocks. ''We are confident there is the liquidity there in the large-cap stocks to enable us to operate an open-end fund successfully.'' Mr Talukdar said India's 900 million population, with a $250 billion economy - the world's 12th largest - made the sub-continent an attractive investment opportunity following liberalisation of the economy. Mr Talukdar said foreign investors, encouraged by reforms, will seek further exposure to Indian equities, which will re-rate stocks. The fund will focus on taking significant stakes in undervalued, mid-sized companies seeking to build their profile and enhance market liquidity. The daily-dealing fund has a minimum investment of $10,000, a front-end charge of five per cent, an annual charge of 1.75 per cent and a redemption fee of up to one per cent. By establishing the Luxemburg fund as a Mauritius sub-fund the group has managed to avoid Indian capital gains tax, normally 15 per cent. The macro-economic fundamentals suggest a period of low inflation and high gross domestic product growth lies ahead, making stock appreciation likely. Inflation has been cut to six per cent and GDP is expected to grow at six to eight per cent.