DESPITE BEING HOME

to more than a billion people and one of the world's largest economies, India has always been an elusive play for U.S. investors. A handful of mutual funds target the subcontinent, and a few prominent Indian companies like

Infosys Technologies

Dr. Reddy's Laboratories

The WisdomTree India Earnings ETF, which started trading Feb. 21, is down 8.0% since inception. The PowerShares India Portfolio ETF, which debuted March 5, has slipped 4.3%. The benchmark Bombay Stock Exchange Sensex stock index is down 11% since Feb. 21. The S&P 500 index, by contrast, is up 1% over the same period.

The short-term volatility, a given in emerging markets, shouldn't be a concern to investors. What's more important is the uncomplicated and inexpensive access granted by the ETFs. India should see plenty of organic, internally focused growth over the next several years, a distinction that becomes important for emerging-market investors obsessed with China's export-led economy. Over the past five years, India's gross domestic product has grown an average of 8.8% vs. China's 10.6%. But more than 40% of China's growth was derived from exports. Indian exports accounted for 22.4% of GDP in 2001, though that figure will rise to about 34% in 2008, according to government projections.

"China's economy is relatively dependent on what's going on in the rest of the world, and India's economy is more domestic," says Sharad Shroff, co-manager of the Matthews India Fund, a no-load mutual fund that returned 36.5% in 2006 and 64.1% in 2007. It's down 23.2% so far in 2008, closely echoing the 23.6% decline of the Sensex index. "About two-thirds of its GDP is driven by domestic consumption. Even during the [1997] Asian financial crisis, India's GDP actually grew in the midsingle digits."

Shroff says that's a big reason why savvy investors want a closer look at the country, historically a tough task for foreigners. Even now, the most accessible investments are relatively concentrated in information technology, banking and energy, and that makes them vulnerable to global industry trends like reduced business spending on technology.

"Instead of the top 20 to 30 names, we are trying to scour the midtier of companies in the India story," he says. "It's brewing up some very attractive opportunities, especially for the long term."

Investors seeking a piece of the subcontinent's growth faced many of the same narrow choices. There's a fair bit of overlap in the top holdings in the Matthews fund and three other mutual funds focused on India: Eaton Vance Greater India, JP Morgan India and the EM Capital India Gateway. The latter three funds charge front-end loads ranging from 5% to 5.75%. There are also closed-end funds like the India Fund and even an exchange-traded note, the iPath MSCI India Index ETN. The new ETFs are cheaper to own and more flexible to trade. Matthews India has an expense ratio of 1.41%, and the ETN charges 0.89%. PowerShares comes in at 0.78%, while the WisdomTree ETF costs 0.88%.

Both ETFs have a lot in common in terms of their top holdings, with sector concentrations in banking, energy and IT, so it's not necessary to own both. Lacking long-term performance data, a lower expense ratio could give a slight edge to WisdomTree.

Reliance Industries, a large and much-admired conglomerate, is the top holding, making up 10% of the PowerShares ETF and 13% of the WisdomTree offering. The stock is up 41% for the past 52 weeks, despite an 18% falloff since the start of 2008. The PowerShares ETF also has 6.3% of its money in Reliance Communications, a separately listed wireless company, 3.5% in Reliance Petroleum, 2.9% in Reliance Energy, and 1.7% in Reliance Capital, bringing the total weighting within one conglomerate to a very concentrated 25%. Both have the majority state-owned Oil & Natural Gas Corp. among their top three picks, while Bharti Airtel, Infosys and ICICI Bank also made the list of each fund's largest holdings.

"Investing in India is quite a difficult thing to do," says David Semple, manager of the Van Eck Emerging Markets fund, which has a 7.8% weighting in Indian stocks. "And I would humbly suggest it's something to be left to the professionals. Trading in India...let's say there's quite a well-connected network of people who will know who is doing what when you get trades."

Luciano Siracusano, WisdomTree's director of research, says his ETF strives to give investors access to companies they couldn't otherwise purchase, but not at the expense of shutting out key parts of the market that are already available as ADRs.

"The goal at the index level was to create something that's representative of India," he says. "And while we think this part of the world is going to be more important going forward, we need to remember that the historical volatility in India and volatility in emerging markets has been much higher than it has been in developed markets and in the U.S."

With that caveat, investors with risk tolerances as high as their investing horizons are long have new Indian options.