A steady performer

FUND PICK: Templeton India Growth Fund

Templeton India Growth Fund (TIGF) was launched in August 1996. It has an entry load of 2.25 per cent and no exit load. The minimum investment should be Rs 5,000 and subsequent investments can be made in multiples of Rs 1,000. The fund offers dividend and growth options.

Performance: TIGF is a steady performer in bull markets. The fund has provided its investors with a return of 15.1 per cent since its launch (till July 28, 2004).

Its five-year return has been an impressive 23.49 per cent compared with the category average of 12.47 per cent. Its three-year return at 35.16 per cent is better than the category's 32.17 per cent.

Portfolio: In recent times, TIGF has managed to cast off its image as an underperformer. It delivered a massive 161 per cent return during the bull-run between April 25, 2003, and January 14, 2004.

This was possible due to an across-the-board unlocking of value. The fund gained heavily as some of its long-term holdings such as Grasim and Container Corp rose manifold.

In its early years, TIGF followed a value investing philosophy. This saw it shun sectors such as technology, FMCG and pharma, which were booming in 1997 and 1998. It took bets on cyclical and PSU stocks which were mauled in the wake of the South-East Asian economic crisis in 1998.

By 2000, the fund felt more confident about its IT holdings. Its exposure to technology scrips shot up to 35 per cent in March 2000, but by then the big boom was already over and IT stocks fell through the floor.

But quality IT holdings helped TIGF withstand the carnage. 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 beaten. But the fund had reduced its allocation to a few high-quality tech stocks, limiting the downside to 30 per cent between the year's high and low while the peer group and the Sensex lost 40 per cent.

When markets rallied post-9/11, the fund benefited from its energy and cyclical holdings. But in 2002, it again fell behind its peers due to smaller allocations to mid-caps and PSU banks which led the market rally.

Outlook: TIGF has rewarded its investors with steady long-term returns, with relatively few wrong bets.

- Value Research