Australians are increasingly likely to find some of their superannuation is invested in Indian stocks, as local fund managers join the flood of foreign capital that has helped pushed the nation's equity markets to record highs in anticipation of a more business-friendly government coming to power.

The result of the Indian general election is due to be declared on May 16. It is widely expected the Bharawtiya Janata Party (BJP), led by its prime ministerial candidate Narendra Modi, will form a minority government.

Mr Modi has been chief minister of the state of Gujurat since late 2001 and is widely credited with improving infrastructure and overseeing a transformation of the region's economy. He is extremely popular among India's burgeoning, mostly Hindu, middle class.

"The number of foreign fund managers visiting India has picked up steadily and dramatically in the six months leading up to the election," said UBS's head of India research, Gautam Chhaochharia. "Modi inspires confidence among business people and investors."

The National Stock Exchange's benchmark Nifty Index and the ­Bombay Stock Exchange's benchmark SENSEX Index have both rallied around 6 per cent since January 1. Both bourses are trading slightly off fresh record highs hit in April as the BJP pulled further ahead in the exit polls.

First State Stewart's Edinburgh-based head of Asia Pacific equities, Angus Tulloch, is one fund manager who is very bullish about the outlook for Indian shares. "India is the region with the most exciting companies to invest in at the moment, and if Modi wins the market will get a fresh boost from international investors," Mr Tulloch said.

First State Stewart is owned by ­Commonwealth Bank of Australia under the Colonial First State Global Asset Management brand.

Melbourne-based investment boutique Bell Asset Management chief investment officer Ned Bell is flying to India next week to visit management teams in Mumbai, Delhi and Chennai, with a view to adding more Indian stocks to the portfolio. Firms Mr Bell plans to meet with include local automotive and tractor manufacturers, banks, technology companies and a Bollywood film studio.

India is also currently a preferred market for Principal Global Equities, with consumer discretionary, technology and healthcare the most attractive sectors, said the group's head of emerging markets, Mihail Dobrinov.

Many in the funds management industry are hopeful India's massive economy will thrive under new leadership and provide a scale of opportunity to invest in emerging-market growth stocks not seen before.

Still, not all fund managers think the time has arrived to invest in the Indian equity market. "It is a mistake to think Indian shares are about to take off – it is a fragmented economy, corruption is rife and the infrastructure is terrible," PM Capital portfolio manager Asian equities Kevin Bertoli said.

UBS's Mr Chhaochharia cautions that while the ascendance of Mr Modi to the role of prime minister would deliver a great sentiment boost in the short term, he is unlikely to succeed in replicating Gujarat's economic success story on a national scale.

"An extremely complex political dynamic at the federal level could make it impossible for Mr Modi to implement many of his desired policies," Mr Chhaochharia said.

Another investment risk is that the prospect of a national government led by Mr Modi, who identifies as a Hindu fundamentalist, is already leading to increased social unrest, with the capacity to create volatility in financial markets and make investors cautious.

West Bengal chief minister Mamata Banerjee called for Mr Modi's arrest on Monday, accusing him of inciting caste-based militants in Assam over the weekend who killed 32 people, mostly Muslim women and children.

Mr Modi has long been condemned for not acting to quell riots in 2002 which killed an estimated 2000 people, mostly from the Muslim minority. Prominent Indian intellectuals, including Booker Prize-winning novelist Salman Rushdie, are petitioning voters and global media outlets to remember this. Investors drawn to demographics

Irrespective of politics, long-term investors are attracted by India's demographic profile. The second-most populous nation on Earth, India's more than 12 billion people have a median age of 27. In median terms, the population is 10 years younger than that of China, the world's most populous nation.

And while China's economy is slowing as the state attempts to implement structural reforms to shift the main source of growth away from exports to a domestic consumption-based model, India's growing economy is already led by domestic consumption.

UBS forecasts India to post a 5.7 per cent increase in economic growth, as measured by gross domestic product, for the current Indian fiscal year ending March 2015.

The Indian rupee is also expected to depreciate in the medium term, providing more support for exports and company earnings. This has been identified as a priority by Central Bank of India governor Raghuram Rajan. On Saturday, a senior BJP leader confirmed that the party intends to retain the highly regarded Mr Rajan in the role.

As China's economy peaked over the past decade, the stranglehold of state-run enterprises and restrictions on direct foreign investment meant little foreign capital flowed into equity markets in mainland China.

A major hurdle for direct foreign investors in Indian stocks was lowered in late March when the Bombay Stock Exchange streamlined its approval process and slashed waiting periods for overseas buyers.