Aug 17: Launched on August 19, 1996, ITC Threadneedle Top 200 and Templeton India Growth Fund have much more in common than their issue dates. Both the schemes are from foreign joint ventures. While Top 200 fund is managed by ITC Classic Threadneedle AMC, a joint venture between ITC Classic Finance and Threadneedle Asset Management, the investment manager for India Growth fund is Templeton AMC, a joint venture of Franklin Templeton and Rajan Raheja group. The schemes are AMCs' maiden offerings. The funds were launched at a time when investor apathy towards equity markets was at its peak and mutual funds, a pariah on common investors' shopping list. The funds struggled to collect the target offer amount of Rs 50 crore. After extending the closing date, the funds just managed to scrape through.

Though it is early to comment on their performance, the growth of the two funds has varied with Top 200 having grown faster. While India Growth fund has appreciated by 22.5 per cent, Top 200 has grown by 31 per cent since launch a year back. Over the past three months, IGF has appreciated by 14.62 per cent as compared to a 15.21 per cent growth in Top 200. Despite its comparatively slow growth, Templeton has seen an inflow of fresh capital of around Rs 38 crore while Rs 3.75 crore has moved out Top 200.

Both Top 200 and Templeton IGF swear by their value-oriented equity selection strategy. A value-manager looks for situations where a stock is priced low relative to the earnings its generates, the dividend it pays, its total asset (book value) or the cash flow it produces. The cash flow can be measured relative to the overall market, relative to the industry, or relative to a specific financial variable such as earnings. A value-oriented style tends to favour stocks that are neglected, have had setbacks, or failed to generate a positive response from the analyst community. They may belong to industries that are less popular or operate in niche areas that are difficult to analyse. Value investors have a fairly long horizon and value-managed funds often have a low portfolio turnover. Interestingly, both Top 200 and Templeton India Growth Fund have the bluest of blue-chips in their portfolio.

Top 200 : Top 200 Fund invests 95 per cent of its corpus in equities which form the BSE 200 index. The fund was quicker than IGF in entering the equity market. By March, 1997, it had achieved a 93.5 per cent exposure in equities. Its quick entry helped to achieve substantial gains during the post budget rally (13 per cent) and the May-June rally (12.54 per cent). The fund has been actively churning its portfolio and follows a top down approach. Between March and June, the fund reduced/dis-invested its exposure in nine of the 26 stocks. The fund swiftly moved out of hospitality stocks by dis-investing holdings in East India hotels, ITC hotels and Indian hotels while increasing exposure in software and petro stocks. As on June 30, 1997 the fund had a 94.7 per cent exposure in equity.

Templeton IGF : India Growth Fund aims to invest 85 per cent of its corpus in equities and the balance in debt and money market instruments. The fund is yet to achieve its targeted equity exposure. In fact as on December 31, 1996, 98 per cent of the fund was in cash equivalent as compared to a 67 per cent exposure of Top 200 in equities on the same date. As on June 30, 1997, the fund had a 73 per cent exposure in equities. In fact, The portfolio has not witnessed much churning with the IGF only divesting 750 shares in Hindalco during March and June. The fund has been gradually building up positions in various stocks. The fund has increased exposure in 20 of the 35 stocks it held on March 31, 1997 while maintaining its holdings in 14 stocks. The fund has a major exposure in PSU stocks with 13 scrips and interestingly, does not have any MNC stock in its portfolio.

Both the funds, helped by the market conditions, have had a good start. Top 200 charges a 3 per cent entry load on new investments. . Templeton charges an exit load of 6 per cent on investments of less than one year.

-- Value Research

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