(Bloomberg) -- Quantum Advisors, which picks Indian stocks for Norway’s $860 billion wealth fund, says investors should stay away from index investing in Asia’s fourth-biggest market.

Investing in indexes is a poor place to put money because you don’t necessarily go into the companies with the most potential, said Ajit Dayal, the director of the Mumbai-based fund, which manages $2 billion in Indian equities.

“It’s a big mistake because you’re buying companies whose business premiseisn’t that I have the best product for you,” he said of some companies in an interview in Oslo after a seminar organized by Norway’s sovereign wealth fund, the world’s biggest. “The business premise is to have the best connection with the government.”

Betting on this strategy can easily go to pieces if the government changes, according to Dayal. The Norwegian fund said in October 2014 that it was planning on increasing its investments “significantly” in India as Prime Minister Narendra Modi prepared to open Asia’s third-largest economy to investments and competition.

This push has so far gone pretty slowly. At the end of the first quarter, it held about 1 percent of its portfolio in Indian bonds and stocks, little changed from the 0.9 percent it held back in 2014. The move is part of a broader plan to increase its presence in emerging markets and generate bigger returns.

India’s benchmark Sensex index has slid 4.3% since October 31, 2014, and is down 4.2% over the past 12 months.

According to Dayal, it’s Quantum’s responsibility to limit the risk the Norwegian fund is taking by going into India.

“Our job isn’t to increase that risk by being in companies whose businesses aren’t consumer oriented, but we believe it’s to curtail and restrict that risk to companies that actually understand business plans as opposed to doing stuff with the government,” he said.

Among the companies that have passed Quantum’s scrutiny are Infosys, Bajaj Auto, Hero Motocorp. and Maruti Suzuki.

As for the others, for a fund like Norway’s, with a focus on corporate governance, it would be shocked to know what some of these companies are doing, he said.

“You shake someone’s hand and you don’t get five fingers back,” he said. “You don’t wanna shake that hand again. Because you lost your client’s money and you lost faith in that company in that management.”

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