The Hindu Business Line : Templeton India Growth: Invest

Conservative investors can add Templeton India Growth Fund to their portfolios. The fund, which focuses on picking “value” stocks, has a more than ten-year track record in fund management — a record marred by substantial underperformance twice, in 2005 and 2006, when growth stocks found favour with investors.

However, the fund has made a comeback in the last 18 months. TIGF’s performance in bear markets is noteworthy. Its focus on value is also beginning to pay off, as investors turn risk-averse and liquidity starts to tighten. These factors underpin our invest recommendation.

Suitability: The fund invests in a blend of large-cap and mid-caps. Stocks in the portfolio are typically of the bluechip variety. Stocks present in the May 2008 portfolio currently trade at a valuation of 14 times earnings, against the Sensex price-earnings multiple of 17.

In a risk-averse environment, this value focus limits downside. However, value stocks mostly under-perform in a bull rally. This makes it suitable for those with a moderate risk appetite and return expectations. Investors can buy TIGF as a means of diversifying their portfolios or as a complement to some of the aggressive funds in their portfolio.

Performance: TIGF delivered a return of 63 per cent in 2007, against the Sensex return of 45 per cent. That the fund has protected equally on the downside, declining by a lower 19 per cent than the market decline of 25 per cent in 2008, suggests that the rise was not on pure momentum alone.

TIGF’s focus on oil and banking did it no good in the bull markets of 2005 and 2006. The fund substantially underperformed the Sensex, not to mention its peers. However, a timely shift in sector biases towards metals paid off significantly in the rally in 2007, while additions in software have helped protect the portfolio during the correction in 2008. The strong rebound in performance puts it back in the top quartile of fund performance over a three-year period, during which it managed an annualised return of 31 per cent. The fund figures in the top 15 of the diversified fund category over a one-year and six-month period.

Portfolio overview: TIGF has a compact asset base of over Rs 350 crore, invested in about 30 stocks. The fund takes focused exposures to stocks; the top ten account for 60 per cent of the portfolio. Metals, software, oil and telecom were key sector holdings as of May.

Some of its top picks from a year ago such as Tata Steel, Tata Investment Corp, Reliance and Hindalco have been major outperformers over the past year.

The fund has also churned the portfolio well, cutting exposures to underperformers such as Grasim and ING Vysya. Sundaram Finance, Shipping Corporation, SAIL and GAIL were some of the other stocks that delivered good returns over the past year.

Fund Facts: Templeton India Growth was launched in 1996. The fund is managed by Dr Mark Mobius.

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