The Hindu Business Line : Templeton India Growth: Invest

TEMPLETON India Growth Fund has turned in an anaemic performance in 2005. This is, however, the wrong time to bail out of the fund. If anything, the fund's strategy could just be the right prescription to ride out the volatile year that 2006 could turn out to be.

There is also no reason to think that the strategy of value investing will run into rough weather in the years ahead, which are likely to be characterised by above-average industrial growth. Templeton India Growth follows the value-investing philosophy. Simply put, value investing involves picking stakes in companies that are valued cheap compared to the market. Long-term prospects for value investing are attractive.

Performance: Gains in 2005 for Templeton India Growth were below that of Nifty and Sensex. And its performance through the rally since March 2003 has been ordinary. It has outperformed the BSE-200 index by just 8 per cent. Scores of other funds have been able to turn in returns that were at least 50 per cent better than that of index.

That this fund has outperformed the BSE-200 in only 19 of the 33 months since March 2003 has had a telling impact on fund performance which, in 2003-2005 has considerably eroded the advantage for long-term investors. Returns over the past five years, although they are better than that of benchmark indices, are much below that of many of its peers. It may, however, be pertinent to note that between 2000 and 2003, Templeton India Growth's performance was almost on par with that of many of its top-performing peers. It underscored the advantage of investing in a fund that specialises in large-cap value stocks.

In addition, its poor performance could be partly attributed to the unusual movement in stocks of oil companies due to the unpredictable interplay of politics and the crude price spike. The fund manager should rightly lay the blame on the overweight exposure to oil stocks. However, it is still too early to make a call on this strategy. Investments in oil price stocks could pay off in 2006, mitigating the inferior performance in 2005. There is no reason to believe that the days of value investing are over.

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