Templeton India Equity Income Fund - Management Makes A Difference

Jayashree / 14 Feb 2011

There is no respite for anxious investors on D-Street as the bears currently have a firm grip of the markets. The FIIs are heavily flushing out their investments thanks to the attractive valuations of the developed economies as compared to emerging markets like India. Rising inflation and its severe (direct or indirect) implications on the interest rates and bottomlines of India Inc are further hurting the market sentiments. The rising price of crude oil, close to the USD 100 per barrel mark, is also taking its toll on the health of the market.
It has been the red flag flying high for the equity markets almost from the start of the year 2011. On a YTD basis the Sensex has fallen by over 12.19 per cent. There is no respite for anxious investors on D-Street as the bears currently have a firm grip of the markets. The FIIs are heavily flushing out their investments thanks to the attractive valuations of the developed economies as compared to emerging markets like India. Rising inflation and its severe (direct or indirect) implications on the interest rates and bottomlines of India Inc are further hurting the market sentiments. The rising price of crude oil, close to the USD 100 per barrel mark, is also taking its toll on the health of the market.

Meanwhile, the global political tension building over the Egypt protests and the domestic scams and the upcoming budget have all left the investors (local as well as global) in a jittery position. Thus, in such a situation one should look out for investing in funds that have managed to limit investors’ losses in testing times. And this fund has managed to do that which is evident from the fact that when the NAV of the diversified multi-cap category on a whole has fallen by 11.06 per cent, this fund’s NAV has gone down by 6.01 per cent. In fact, the fund has declined the least amongst the diversified funds ‘multi-cap’ category and has been the best performer in this period.

Launched in 2006, the fund had a prudent start and post-2007, it picked up well and has been consistently performing well since then. In fact, it stood in the top five funds in terms of its performance during CY09 and also managed to beat category returns in CY08 and CY10. Such a performance in both bullish as well as bearish periods proves the mettle of this fund. It is a multi-cap fund that has managed its risk-return well, considering that the fund is the fourth-best in terms of its Sharpe Ratio that stands at 0.35. This is regardless of the fact that it has a very compact portfolio, being almost fully invested and nearly 50 per cent of its assets in small and mid-cap stocks.

The fund has a concentrated portfolio and out of its selection of 22 stocks the top ten stocks and the top three sectors account for over 50 per cent each of its net assets. Despite such aggressive portfolio attributes, the fund manager seems to be trying to astutely balance the portfolio risk, considering that the fund’s PE and P/ BV stood slightly below that of the Sensex in the trailing 12-month period. Such a performance and portfolio management come from a man with over 40 years of experience in global and emerging market fund management, J Mark Mobius, who co-manages this fund. Considering all these factors, moderate risk investors can take an incremental exposure to this fund through SIP.

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