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Home > Business > Special

All about Templeton India Equity Income Fund

March 24, 2006

  • Type
  • Open-ended equity (diversified)
  • Benchmark
  • BSE 200
  • Min. Investment
  • Rs 5,000
  • FaceValue
  • Rs 10
  • Entry Load
  • 2.25% (max.)
  • Exit Load
  • 1.00% (max.)*
  • Issue Opens
  • March 22, 2006
  • Issue Closes
  • April 20, 2006
    *For redemptions made within 6 months of allotment; 0.50% for amounts less than Rs 5 crore.

    Investment Objective*

    An open-end diversified equity fund that seeks to provide a combination of regular income and long-term capital appreciation by investing primarily in stocks that have a current or potentially attractive dividend yield.
    *Source: Offer document

    Is this fund for you?

    Templeton India Equity Income Fund (TIEIF) is an open-ended diversified equity fund which will follow the value style of investing. Value style investing entails investing in stocks that are trading at a discount to their fair value. The fund manager invests in these stocks and holds onto them until the mispricing is corrected.

    However what makes TIEIF an interesting investment proposition is its investment universe. The fund will invest in stocks which have a high dividend yield. Traditionally, stocks with a high dividend yield are considered to be attractive buys as they tend to be stable performers over longer time frames.

    Furthermore, the fund is mandated to invest upto 50% of its corpus in foreign securities. This provides the fund with a unique edge from the diversification perspective. For investors whose portfolios are populated with domestic stocks and equity funds (which is the case with most investors), the fund offers an opportunity to diversify across global securities denominated in various foreign currencies like the US dollar, Yen and the Euro to name a few. Investors have the opportunity to diversify across several economies (both developed and emerging) and participate in their growth.

    Franklin Templeton's expertise in researching emerging markets is particularly noteworthy. Its team led by Dr. J. Mark Mobius (refer to profile below) has carved a special niche for itself in this area.

    Investors, who have a flair for equity-oriented investments and are looking to diversify their assets across various economies and currencies, should consider adding the fund to their portfolios.

    Portfolio Strategy

    TIEIF is mandated to invest 70%-100% of its assets in equities and equity-linked instruments. Of this, at least 20% will be in large domestic companies; the fund house has defined large companies as those which have a market capitalisation of Rs 13.5 bn and more. Other domestic companies can account for a maximum of 25% of TIEIF's net assets.

    InstrumentsAllocation Range
    Equity and equity linked instruments out of which,70%-100%
    Large companies20%-75%
    Other Indian companies0%-25%
    Foreign securities0%-50%
    Debt, money market instruments and cash0%-30%

    TIEIF is mandated to invest upto 50% of its assets in foreign securities as permitted by SEBI/RBI. The fund house has indicated that the fund is likely to hold upto 35% of its corpus in foreign securities.

    Fund Manager Profile

    Dr Mobius joined Templeton in 1987 as the President of Templeton Emerging Markets Fund Inc. in Hong Kong. He currently directs the analysts based in Templeton's eleven emerging markets offices and manages the emerging markets portfolios. He has spent over thirty years working in Asia and other parts of the emerging markets world.

    He holds Bachelors and Masters Degrees from Boston University, and received his Ph.D. in Economics and Political Science in 1964 from the Massachusetts Institute of Technology.

    Mobius will be assisted by Chetan Sehgal, Director Research, Franklin Templeton.


    More Specials

    Given its fund management style, we believe TIEIF is likely to be a stable performer going forward. Albeit the fund is unlikely to deliver returns at a scorching rate, the ability to deliver consistent returns at low volatility is likely to be TIEIF's forte. It will be aided by the fund house's strong process-driven approach to investments.

    The fund house has also indicated that it will bear TIEIF's issue expenses, which would otherwise have been charged to the investor. The same will reflect in the investors' returns, since the fund's net asset value (NAV) is declared after all expenses, including NFO expenses, have been charged.

    Powered by its investment style and a unique diversification edge, we believe that the fund can add value to the investor's portfolio.

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