As the threat of a trade war grows and emerging-market central banks sacrifice growth to protect their currencies, equity investors have their backs to the wall. But in their search for a haven, one name keeps cropping up: India. The South Asian nation, the fastest-growing major economy in the world, enjoys relative insulation from external shocks as a booming middle class delivers enough domestic demand to counter the fallout from protectionism, according to money managers including Franklin Templeton and Newton Asset Management. Exchange-traded fund house WisdomTree Investments Inc. goes a step further, recommending investors allocate as much as 20 percent of their portfolios to Indian equities. India is \u201cone of those places that provides better risk-reward compared with emerging markets at large, especially China or more globally-linked countries,\u201d Gaurav Sinha, an asset-allocation strategist at WisdomTree, said in an interview in London. \u201cIf I am investing in India, I am investing for the local consumption.\u201d That might sound brave to anyone who\u2019s been watching India\u2019s performance this year. While stocks are up 4.1 percent in local-currency terms, the rupee\u2019s weakness has left investors with losses in dollar terms. Since a global selloff began in January, equities have erased $274 billion, equivalent in value to the entire market of Finland. Increased volatility and passive-fund outflows suggest India is no less vulnerable to the jitters than its peers. The country\u2019s central bank raised interest rates for the first time in four years last week, and Governor Urjit Patel has even gone as far as pleading with the Fed to go slow with its interest-rate increases. With general elections less than 12 months away and Prime Minister Narendra Modi facing a united opposition, political uncertainty looms large too. But that\u2019s doing little to deter the bulls. When the dust settles, they say, the country will start to outperform again. And they have history on their side: India was quicker to rebound from the 2008 crisis, handing investors 70 percent greater returns than the rest of the developing world since then. \u201cI don\u2019t think our positive stance on India has changed,\u201d said Vikas Chiranewal, a Mumbai-based senior executive director for Franklin Templeton Investments\u2019 emerging-markets group. \u201cThe broader market was becoming a bit pricey and some amount of price decline is healthy.\u201d Growing consumerism Propelled by economic reforms that started in 1991 and have been deepened by Modi\u2019s government, India\u2019s middle class has ballooned past 600 million, according to a study by Mumbai University. The nation will become the third-largest consumer economy, with household spending tripling to $4 trillion by 2025, according to a report by Boston Consulting Group last year. That\u2019s made Indian markets a magnet for foreign investors, spurring flows of $335 billion in the past 10 years. The International Monetary Fund predicts India\u2019s gross domestic product will grow an average of more than 8 percent annually in the next five years. \u201cIndia is the only, large accessible country which has the potential to grow at substantial rates,\u201d Sinha said. Yet India is less reliant on exports than most other emerging markets. With almost two-thirds of GDP accounted for by consumption, companies have their hands full serving local demand. As a result, exports account for just 11 percent of the GDP, compared with China\u2019s 19 percent and Russia\u2019s 23 percent. Mumbai\u2019s $2.2 trillion stock market is primarily driven by investors at home. Foreign-investment flows have accounted for a fraction of the trading even during this year\u2019s declines. Still, signs abound that India\u2019s stock market is overcrowded. Investors have to pay more than $18 for every dollar of projected profit, one of the world\u2019s highest valuations. The country\u2019s sensitivity to oil prices and the approach of the 2019 general elections increase the risk that the market may be volatile for the next 12 months. \u201cValuations have become more stretched for the Indian equity market as a whole, but provided the oil price does not continue to rise, we think India does offer relative insulation against protectionist trade policy,\u201d said Douglas Reed, a London-based strategist at Newton Investment Management.