A value fund with an international flavour
Emerging markets, including India, do not offer too many ‘value’ or less expensive stocks, given their growth focus. If you wish to hold a portfolio of value stocks, mostly in India and in pockets of other growth economies, then Templeton India Equity Income is a good bet.
With about 30-35 per cent exposure to international stocks, this fund delivered 11.5 per cent annually in the last three years, comfortably beating its benchmark BSE 200’s return of 5.1 per cent. The fund also finds a place in the top quartile of three and five-year performance chart of diversified equity funds. This performance is notable, as most funds with international exposure have struggled to beat domestic diversified funds over the long term.
Suitability
The fund is suitable for investors who want to take limited exposure to international markets without losing capital gains tax benefits. Templeton India Equity Income will hold only upto a third of its assets in international stocks. Hence, with at least 65 per cent holding in Indian equities, it will qualify for capital gains tax benefits available to equity funds.
As the fund holds a number of dividend yield stocks as part of its value approach, it also regularly distributes dividends. Since, its inception the fund has, without fail, paid out dividends once or twice a year. You can capitalise on this by either opting for dividend payout (if you need some income) or go for dividend reinvestment.
It is noteworthy that funds with international exposure are impacted by currency movements. For instance, the rupee’s depreciation against the dollar, last year, improved gains made by international funds. While Templeton India Equity Income’s exposure to international stocks is limited, still an element of volatility from currency does exist. Hence, you will do well to sweep profits occasionally through the dividend payout/reinvestment options.
For the same reason, let this fund not be your core holding. Use it as a diversifier and limit exposure to the fund.
Performance
While Templeton India Equity Income is not strictly comparable with domestic equity funds, we compared it with local dividend yield funds to see how it fared. Over a three- period, the fund lagged Birla Sun Life Dividend Yield Plus by less than a percentage point and marginally outperformed UTI Dividend Yield. The fund’s return since inception in 2006, at about 13 per cent, is next only to UTI Dividend Yield. It has either kept pace with, or outperformed other dividend yield funds since its inception.
At 16 per cent, the fund’s one-year return has beat top peers by 10 percentage points, given the sound rally in other foreign markets.
Portfolio
Templeton India Equity Income boasts of an offbeat portfolio with stocks from semiconductor industries to transportation – sectors that do not find much place in the Indian listed universe. Semiconductor stocks such as United Microelectronics Corporation (Taiwan) as well as shipping plays such as Cosco Pacific are part of the fund’s portfolio. True to its value style, the fund has typical high dividend yield sectors such as finance, oil and chemicals. Even in the dividend yielding FMCG space, it holds less expensive stocks from countries like Taiwan and Chile.
As a value fund, Templeton India Equity Income would have to scout outside India for value. India has on most occasions traded at a premium to many Asian, emerging nations. At one-year forward price earnings ratio of 14.9 times, India is a premium to Chinese/Korean markets (10-11 times)
The fund is managed by renowned fund manager Dr. J Mark Mobius and assisted by Chetan Sehgal and Vikas Chiranewal.
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Dear Madam, My opinion on this fund is “Not Suitable even for normal holding”. Category best is 11.4 wherew as for Templeton India Eqity (G) Fund return is 4.9 for 5 years. This fund ranked No.17 for 5 years with current NAV 21.96. Where as ING Dividend Yield (G) is far better than Templeton india Equity with 10.2 fund return, rank No.02 for 5 years with current NAV 24.54. Not only these ING Dividend Yield (G) Fund having Top Portfolio Holdings than Templeton.
My Personal opinion is ING Dividend Yield (G) Fund can any body add to their basket for as normal Holding without any hesitation almost all on par NAV rate with Templeton
Thank you for your views Mr Mohan. We would like to clarify a few points: One, we do not always feature the top funds in each category. There are funds that are consistent performers that may not be in chart toppers’ list. Two, Templeton India Equity Income invests over a third in global stocks. Hence it is not strictly comparable with ING Dividend Yield which is a domestic fund. Foreign market performance will have a bearing on Templeton’s performance. Templeton’s one year return at 16 per cent is higher than ING by 8 percentage points simply because some of the foreign markets (where Templeton invests) performed better than India. Hence, difference in performance as a result of market conditions will exist. That said, Templeton has beat its category average of 2.3 per cent over a five-year period.
ING Dividend Yield, has no doubt, put up a good performance as stated by you. But because its asset size at Rs 85 crore is too small, we have refrained from recommending it. With small size, any redemption pressure can hurt performance. We will therefore prefer to wait for ING’s asset size to improve before recommending it. – Vidya Bala
Dear Madam, My opinion on this fund is “Not Suitable even for normal holding”. Category best is 11.4 wherew as for Templeton India Eqity (G) Fund return is 4.9 for 5 years. This fund ranked No.17 for 5 years with current NAV 21.96. Where as ING Dividend Yield (G) is far better than Templeton india Equity with 10.2 fund return, rank No.02 for 5 years with current NAV 24.54. Not only these ING Dividend Yield (G) Fund having Top Portfolio Holdings than Templeton.
My Personal opinion is ING Dividend Yield (G) Fund can any body add to their basket for as normal Holding without any hesitation almost all on par NAV rate with Templeton
Thank you for your views Mr Mohan. We would like to clarify a few points: One, we do not always feature the top funds in each category. There are funds that are consistent performers that may not be in chart toppers’ list. Two, Templeton India Equity Income invests over a third in global stocks. Hence it is not strictly comparable with ING Dividend Yield which is a domestic fund. Foreign market performance will have a bearing on Templeton’s performance. Templeton’s one year return at 16 per cent is higher than ING by 8 percentage points simply because some of the foreign markets (where Templeton invests) performed better than India. Hence, difference in performance as a result of market conditions will exist. That said, Templeton has beat its category average of 2.3 per cent over a five-year period.
ING Dividend Yield, has no doubt, put up a good performance as stated by you. But because its asset size at Rs 85 crore is too small, we have refrained from recommending it. With small size, any redemption pressure can hurt performance. We will therefore prefer to wait for ING’s asset size to improve before recommending it. – Vidya Bala