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With the world's developed economies now saddled with massive "as far as the eye can see" deficits and Depression-era levels of idleness (if you properly add part-time employment levels into the official unemployment statistics), it's not hard to buy into the view that future returns for risk assets in these economies will be sub-par for the foreseeable future. It's a view that's been dubbed the "New Normal" and trumpeted by the likes of Bill Gross, one of the heads of Pimco, the world's largest bond fund.

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Bullish Case For Emerging Markets
All this presents a strong case for investors to allocate at least a portion of their assets into the emerging markets, with special emphasis on the so-called BRIC economies - Brazil, Russia, India and China - all of which continue to achieve strong economic growth relative to their developed counterparts. And such growth is now expected to attract sizable investment flows over the next few years that is bound to push up values.

According to a recent study by Swiss banker Credit Suisse, Middle Eastern sovereign wealth funds could boost their investments in emerging markets to 25 percent of holdings by 2016. That's bound to be a sizable chunk of change given the fact that those countries pump about 20 percent of the world's crude oil.

Despite China's Gains, India Still Gets The Nod
While China's investment prospects have tended to garner the lion's share of media and investor attention over the last couple of years, India, which now boasts Asia's second-fastest growing economy, has been getting its full measure of attention lately.

According to emerging-markets investment guru Mark Mobius, chairman of Templeton Investment Management, India is the place to be. While the country's benchmark Sensex Index is up a blistering 76 percent so far this year, Mobius expects Indian stocks to extend their gains for another three to four years.

Indian IT Sector Recovering
One sector of the Indian market that can be easily bought by U.S. investors, since the shares are also listed as ADRs on U.S. exchanges, is India's showpiece IT outsourcers. After being slammed by a huge drop in demand for their services as global IT budgets shrank during the recession, signs now indicate that companies like Infosys Technologies (Nasdaq: INFY), Wipro (NYSE: WIT), Satyam Computer Service (NYSE: SAY) and Tata Consultancy (OTC: TACSF) are seeing a steady improvement in their business as cash-strapped global firms turn to them for IT solutions that will generate cost savings. IT research firm Gartner Group now expects global IT spending to rebound by 3.3 percent in 2010 following a 5.2 percent dip in 2009.

In recent months, Indian IT outsourcers have managed to land major deals with diverse clients that have included oil and gas giant BP Plc (NYSE: BP), UK brewer SABMiller (OTC: SBMRY) and German car maker Volkswagen (OTC: VLKAF). Now there's talk that the outsourcers could land an additional $1 billion in contracts from troubled U.S. banks emerging from the TARP program. This could include such Wall Street giants as JPMorgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS), all of which are reportedly keen to improve the operational efficiencies of their back-office operations.

The Bottom Line
Despite trading nearly above their post-crash highs, shares of the Indian IT outsourcers could still move higher, as their competitive cost structure continues to keep them in the running to win lucrative contracts. (For related reading, check out Go International With Foreign Index Funds.)

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