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Aarati Krishnan

WITH an absolute return of around 60 per cent since December 2002, Templeton India Growth Fund (TIGF) has been an active participant in the recent bull run. The fund's performance in the recent rally compares favourably with peers such as Franklin India Bluechip and HDFC Equity Fund, two large cap funds with a good track record.

For long-term investors in the fund, the recent performance provides evidence that the fund is capable of delivering good returns in a bull market, as it has in bearish market conditions. So existing investors can hold on to their investments in this fund.

However, experience suggests that even well-managed funds are vulnerable to a significant decline in their NAV, during a correction in equity values. Therefore, fresh investments in the fund should be avoided for now.

Investors in the fund with a short holding period should also look to booking profits on part of the gains made in the recent times to protect the value of their investment.

Dividends, not an attraction: Prospective investors should not be swayed by the fact that the fund is set to shortly pay out a dividend (record date September 16, 2003), as dividends do not add anything to the total returns earned by a fund. Even those considering an entry into the fund for booking a notional capital loss should factor in the possibility of a decline in NAV due to a correction in broad market levels.

Performance: The TIGF has generated an annual return of 12 per cent and has outpaced the S&P CNX Nifty in five out the seven years since launch. Though the fund scores high on consistency, its cumulative returns over the past four years have been much lower than Franklin India Bluechip and HDFC Equity Fund.

This appears to be mainly on account of missed opportunities in 1998 and 1999, when several of TIGF's peers doubled their NAVs, on the back of investments in IT, pharma and FMCG stocks. In comparison, the TIGF's performance was sedate in these years.

But having maintained a bias towards cyclical stocks, the TIGF managed to fare much better than these funds in the years 2000 and 2001.

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