The Hindu Business Line : Templeton India Growth: Hold

TIGF believes one should "buy at a point of maximum pessimism and sell at a point of maximum optimism". Given its contrarian strategy, the fund is more suitable for investors who would like to go against the market.

With returns of just about 27 per cent over the past year, you might be disappointed with the performance of Templeton India Growth Fund (TIGF). The fund, which put on a stellar show between 2000 and 2003, has been a laggard since 2005. Over the past three years, the fund has lagged the BSE-200 more than half the time.

But the performance is in line with that of other funds that follow the value investing style. TIGF continues to be one of the better funds for those who believe in the value investing strategy. The fund has trailed the MSCI Index (Morgan Stanley Capital International) over the past year by a wide margin. Its performance is, however, ahead of several value funds, most of which focus only on high dividend-yield stocks.

Suitability: TIGF, like other value funds, invests in stocks that are available at a price lower than their intrinsic value. This often means buying stocks that are temporarily out of market favour. Value funds are, therefore, suitable for those who have a long-term horizon.

As TIGF proclaims in its offer document, it believes that one should "buy at a point of maximum pessimism and sell at a point of maximum optimism". This could explain why the fund has maintained a high exposure to oil and gas stocks, even as other value funds have shed their holdings in these stocks, which have been gross underperformers.

Given its contrarian strategy, the fund is more suitable for investors who would like to go against the market. TIGF has a track record of doing well in a bear market; it performed impressively in 2000 and 2001. In the last three years, while it has not done well in rising markets, it has contained declines well in months when the market has fallen. Even over the last three months, it has moved in tandem with the BSE-200.

While the fund has a large-cap bias and is, therefore, less risky than a mid-cap fund, TIGF does sport a higher risk profile in one respect. It takes concentrated exposures to stocks and sectors. About 70 per cent of its assets are invested in the top ten stocks. Sharp swings in any of its top holdings can impact performance. Close to 25 per cent of its portfolio is invested in oil and gas stocks.

Portfolio overview: TIGF is among the smaller funds in the Franklin Templeton fold, with an asset base of about Rs 315 crore. There are only about 30 stocks in the portfolio. About 20 per cent of its assets are invested in mid-caps or stocks with a market capitalisation of less than Rs 2,000 crore.

ING Vysya Bank and Tata Investment Corporation are two stocks that figure in the top ten holdings. Oil and gas, banking and cement form the three top sectors. The fund follows a "buy-and-hold" approach. Only about 20 per cent of its portfolio changes in any year.

Fund facts: Templeton India Growth Fund is managed by Dr J. Mark Mobius. Its NAV is Rs 52.59.

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