"The Principal Financial Group in India is likely to invest over the next five years in the range of $100 million. I would say that is conservative figure," Sorensen told Reuters in an interview late on Thursday.

He said the investments would be direct investments and not include purchases of Indian equities by its funds. The group manages nearly $106 billion in assets worldwide.

Principal said on Wednesday it was taking a 50 percent stake in the asset management subsidiary of one of India's largest term lenders, Industrial Development Bank of India.

"Together with IDBI, we will look at other opportunities...We don't expect the mutualfund marketplace to continue to be so fragmented as it is today. We expect it to consolidate," Sorensen said.

India's mutual fund and pension fund businesses offered great potential, given the size of the economy, he said.

"The mutual funds business in India should be five times the size it is. It is extremely underinvested... Pension funds should be 15-20 Times larger than it is currently is. There is a lot of pent-up demand."

Indian mutual funds had Rs 814.81 billion ($18.71billion) worth of assets under management at the end of August.

Asked how he viewed Indian equities, Sorensen said they were "undervalued, somewhat risky and underinvested".

"The market is still very light and very shallow in terms of what it could be. The market in a country of 900 million people with GNP growing at five to seven percent annually should be three to four times the size of this. It is much too thin."

Indian equities, mainly in the technology and infrastructure sectors, offered good bargains to internationalinvestors as valuations remained attractive despite the recent selling by foreign funds ahead of the elections, he said.

Foreign funds have sold over $100 million worth equities since August after investing nearly $1 billion between April and July this year.

"When you really get down to an analyst and pick his brain and talk in terms of 'tell me the truth. Tell me if you have four or five markets, where you will invest your dollar,' many of them will say India. India is undervalued now. You can get good value now. The PEs (price-earning ratios) are low'," Sorensen said. But India's frequent elections were a concern, he said.

"There is a lot of uncertainty around that (elections)...Nobody expects drastic policy changes in India... But the fact that nobody expects drastic policy changes still does not satisfy the markets. "The markets are very quarterly oriented, short-term oriented and they would like a more stable environment," he said.