Gartner research estimates that Indian handset sales will hit 138.6 million units during 2010 - 10% of global sales for the year - an 18.5% increase on last year. And it's just the beginning, sales are expected to hit 206 million in 2014.

Challenger brands taking on Nokia

While Nokia still leads the way with market share of 52%, evidence shows that cheaper domestic challengers are making a dent in their business. The Finnish company saw their slice of the action shrink by 11.8% in 2009-10.

Others are feeling the squeeze, Sony Ericsson's share is down to 3%, from 6% and Motorola's has dropped 2.5%, to 1% market share.

Is low-cost enough?

On the back of heavy celebrity led marketing, low cost brands including Micromax (endorsed by Akshay Kumar), Lava, Spice, Karbonn and Lemon now control 10% of the market. But competition is intense - there are believed to be 50 local brands fighting it out - and despite the size of the market, not all can survive.

While low cost entrants have a toehold in the market, "low cost" wont be enough alone, more Indian consumers are trading up to smart-phones and 3G devices. Gartner conclude that 16.7% of mobile devices sold in India this year will support 3G, up from 9.2% last year, this figure will leap to 69% of sales by 2014.

Nokia set to hit back

Nokia also plans to take them on at the value end of the market. The brand currently doen't offer a low cost touch screen handsest but this will change. D. Shivakumar, MD of Nokia India believes that, "when Nokia fills in that (gap), there is no reason why consumers will not choose it". Casting further doubt on lower cost rivals he says, "hit and run tactics don't win".

Future outlook

Those domestic brands that do survive will focus on innovation in line with market demand. Jaideep Ghosh of KPMG believes, "research and development will play a major factor in the sustainability of the Indian brands".

While domestic brands have created emotional attachment through use of celebrity endorsements the real challenge is whether they can create credible higher value smart-phone services.

In addition, they need to protect their hard fought share at the lower end of India's value pyramid.