The Hindu Business Line : Staying cautious is advisable

OVER the next few weeks, the market appears set to continue its downward trend. Negative sentiment abounds and anxiety over the pronouncements in the Budget has enhanced the downside risk.

Over the next month, even in the case of stocks that offer considerable value at the prevailing prices, it would be better to make purchases only in small lots. This would apply to `buy' recommendations featured elsewhere in the Investment World section, too.

For this week, we focus on an equity mutual fund that has a reasonable performance record, especially during periods of downturn: Templeton India Growth Fund. Templeton India Growth's stated strategy is to focus on stocks with most potential for long-term growth. Given that the markets are unduly focused on short-term uncertainty, such a focus on long-term value could potentially prove to be rewarding.

Templeton India Growth: Large-cap value focus

Fresh investments can be considered in Templeton India Growth Fund by investors with the patience and the ability to hold for the long term. Investors with an investment horizon of more than five years, especially young investors, can opt for the systematic investment plan route.

This fund has turned in returns of 14.4 per cent per annum since its launch in September 1996 compared to Sensex returns of 4.3 per cent. In the past five years, returns were of the order of 27.2 per cent per annum. This compares favourably with the returns of 3.7 per cent and 7.9 per cent clocked by Sensex and MSCI India Value Index, respectively.

In the past, the risk involved in the fund has tended to be lower than that of the index. As such, the returns are even more superior when adjusted for risk.

At the end of May 2004, the fund was largely invested with the proportion of cash only at about 6.4 per cent of net assets. The top five stocks were MICO, SBI, Tata Steel, Grasim and Tata Tea. The exposures in individual stocks are concentrated with the top ten stocks accounting for nearly 60 per cent of net assets.

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