Templeton India Growth Fund may not be the most flamboyant of diversified equity funds but it continues to earn its keep as a steady performer. The fund has had its share of hits and misses lately. On the bright side, it was able to shrug off its image of being an underperformer in bull markets as it delivered a massive 161 per cent return in the bull run extending from April 25, 2003 to January 14, 2004. This was possible due to an across-the-board value unlocking and the fund gained heavily as some of its long-term holdings such as MICO, Grasim and Container Corporation rose manifold.
The fund started off with a value investing philosophy. This saw it shun sectors such as technology, FMCG and pharma, which were booming in late 1997 and 1998. Big bets on cyclical and PSU stocks saw the fund's NAV being mauled in the wake of the South East Asian economic crisis in 1998.
By 2000, the fund felt more confident about its IT holdings. Technology exposure shot up to 35 per cent in March. But by then the big boom was already over and technology stocks fell through the floor with intermittent corrections. Of course, quality IT holdings helped it withstand the carnage better. More importantly a year-end recovery in PSUs, cyclicals and some finance stocks helped the fund end a bad year down just 2.79 per cent.
In 2001, tech stocks continued to be battered down. But the fund had drastically pruned its tech allocation and limited it to a few high quality stocks thereby limiting the downside to 30 per cent between the year's high (the Budget) and low (9/11) while the peer group and the Sensex lost 40 per cent. When markets rallied post-9/11, the fund benefited from its energy and other cyclical holdings and ended the year in the first quartile of its category for the second year running.
However, in 2002 it again fell behind its peers due to smaller allocation to mid-caps and PSU banks which led the market rally and as a result, it was relegated to the third quartile.
All in all, Templeton India Growth Fund has rewarded investors who have stayed the course with steady long-term returns, with relatively few misfires. Investors with the patience to ride out some bumps should find much to like here.
This article was originally published on July 22, 2004.
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