Templeton India Growth Fund (TIGF), a large-cap equity fund follows a liberal value investing philosophy. Since 2000, the fund has posted some strong results. The fund's 5 per cent loss for the year-to-date through November 29, 2001, is nothing to get excited about. But, it is better than 93 per cent of the equity funds, registering a 20 per cent average fall during the same period.
Although the fund has done well in a faltering market, the long-term performance of the fund doesn't stack up. In its tenure of over just over 5 years, it flags a total return of 5.06 per cent as on November 29, 2001, assuming reinvestment of its maiden 15 per cent dividend paid in April 2000. Besides, strong relative and consistent performance has not been the norm at the fund.
But still TIGF holds promise for its well-diversified portfolio of large-cap fundamentally strong companies. Unlike its initial years when it followed a rigid definition of value stocks, the fund has now tilted to growth stocks embracing a moderate interpretation, customised to Indian situation. Earlier, the fund's criteria for value buys were the companies selling at great discount to their five year potential. It did hold on to cyclical and PSU stocks for a while, but only to change track, as hardcore value investing has proved hazardous in the absence of events like merger/acquisition/asset sale or other financial engineering in the Indian scenario. For these triggers do unlock value of a cheap stock but often a cheap stock remains cheap in the absence of such value-unlocking activities.
Despite changing its track to growth stocks, the fund has been highly focussed on strong companies. In the boom times of technology, the fund built a 30 percent allocation, but with selectivity. In early 2000, it has sizable position in Satyam, Infosys and Hughes Software. And the fund proactively pruned its technology stake by the year-end. With its diversity amongst the FMCG, energy, automobiles, diversified company stocks and a relatively high cash position, the fund was among the less hurt in 2000, with a loss of just a fifth of its category's losses.
With more than half of its Rs 122 crore asset base in growth oriented sectors, the fund manager still holds a bias for value picks. The fund holds few PSU stocks, the likely divestment candidates. With its blend portfolio, Templeton India Growth Fund aims greater stability than a pure growth or a value portfolio. And this explains its positioning in the below average risk-spectrum among equity funds. The fund has maintained an average 10 percent position in cash. This has helped fund lose less, but can prove to be drag on performance in an upbeat market.
Templeton India Growth Fund has evolved to strike a fine balance between the large cap growth and value picks and is poised to deliver return from equities with greater stability. Besides, the latent potential will depend on it getting lucky with any of its value bets.