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Standing Up To Bears

TIGF has seen many bull-markets but it is more impressive when markets are in a tailspin. If the recent strong showing is replicated in other bullish periods this could turn out to be a suitbale investment across market cycles

Here is a fund, which tends to perform better in bear markets. In bull markets returns are there, but at a more relaxed pace.

Templeton India Growth Fund started off with a value investing philosophy. This saw it shun sectors such as FMCG and pharma, which were booming in late 1997 and 1998. The absence of stocks like HLL thus capped the funds upside. Heavy investments in cylicals and PSUs saw the funds NAV take a hammering in the wake of the South East Asian economic crisis in 1998. It was an extremely unpleasant start and the fund found itself in the category's basement for the first two years.

It was only in 1999 that the fund started looking at technology. This exposure was, however, limited to Satyam and Aptech and never exceeded 10 per cent. A similar situation prevailed in the pharmaceutical and FMCG sectors. While this allocation the fund just crept into the third quartile of returns.

By 2000 the fund felt more confident about its IT holdings. Technology exposure was 30 per cent in March. But then the rally was over and technology stocks fell through the roof, with intermittent corrections. Of course quality IT holdings helped to withstand the carnage better. More importantly an end of year recovery in PSUs, cylicals and some finance stocks helped the fund end the year down just 2.79 per cent. In the coming year technology continued to be battered. Lower allocation to technology and that too to better stocks helped. Between the years high point (the budget) and low (post 9/11) the fund lost 30 per cent as compared to a 40 per cent fall by the peer group as well as the Sensex. When markets rose post budget the fund benefited from its energy and other cyclical holding. On the technology front the fund was not so certain and sold off just as the rally started to enter later on. This was however, sufficient to take the fund into the first quartile of its category for the second year running.

Through the course of these events the fund stuck to its large cap orientation. This held the fund back as mid caps roared throughout the year while large caps were silent. Thus though the funds sector allocation was adequate the absence of mid caps held it back and it fell into the third quartile of its peer group. Bank stocks were a case in point where the fund did not participate in the re-rating exercise of PSU banks.

The fund has shown a strong performance during the current bull-phase. This has been a result of the across the board value unlocking taking place and the fund has benefited from some of its long-term holdings such as MICO, which have risen two and half fold in recent months. Along with this exposure to stocks such as SBI has helped the fund deliver a strong performance in the current year.

In all Templeton India Growth Fund can serve investors who look for a large-cap portfolio, which tends to do better in bearish markets. If the current performance is replicated in other bullish periods the fund could turn out to be suitable investment across all market cycles.