The Hindu Business Line : India-dedicated funds outperform domestic peers

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Diversified equity funds in India generated just 5.13% returns.
Average 1-year return of India-dedicated funds at 10.31%
ICICI Bank favoured banking stock; ABB, BHEL among favoured engineering stocks.

Chennai May 6 Foreign fund managers managing India-dedicated funds have been twice as profitable compared to local mutual funds investing in Indian stocks. The average one-year return produced by India-dedicated funds, 43 in all, stood at 10.31 per cent, according to US-based Morningstar, an institution that tracks mutual fund performance.

In contrast, diversified equity funds in India generated just 5.13 per cent, according to Value Research, an institution that tracks mutual fund performance in the country.

Of course, it is another matter that a majority of them have not been able to outperform the benchmark market indices.. The BSE Sensex and the NSE's S&P CNX Nifty provided a return of 12.85 per cent. The one-year return of MSCI Emerging Markets Asia index gave out a return of 16.85 per cent.

Among the India-dedicated funds, schemes from Franklin Templeton lead the pack with an annual return ranging from 17.18 per cent to 19.8 per cent as on May 4, 2007. On the other hand, Invesco's `India Equity C USD Inc' and `India Equity A USD Inc' reported a negative return of 0.07 per cent and 0.58 per cent respectively.

However, schemes from AB India stable lead other fund houses when performance is measured for the calendar year 2007. It generated a return during the period ranging from 9.22 per cent to 8.09 per cent. The average return produced by all the India-dedicated funds (50 according to Morningstar) during this period is 5.04 per cent.

Portfolio structure

All the major funds such as Franklin, Fidelity, HSBC, AIG and Morgan Stanley have the highest exposure to stocks of major corporates of India. While ICICI Bank is their favoured banking stock, ABB and BHEL feature among the favoured engineering stocks.

Bharti tops the list among the telecom stocks. Apart from these, Zee, Grasim, Bajaj Auto and ITC also feature among the top 5 holding of foreign funds.

However, asset size of all the funds was not available. Of the available schemes, Ashburton Chindia commands the highest asset of $5 billion.

Overseas schemes

Currently only two schemes — Templeton India Equity Income Fund and Principal Global Opportunities — enable Indian investors to benefit from overseas investments. Fidelity International Opportunities Fund has just completed its NFO in April and further details are awaited.

Templeton has provided a return of about 26 per cent since its inception (May 18, 2006). It has Rs 1,727-crore assets under management as on March 30.

Principal Global Opportunities, on the other hand, provided 10.132 per cent on a year scale. It manages assets worth Rs 441.25 crore as on March 30.

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