Investing in India presents vast opportunities for global equity investors, especially when contrarian outlooks reveal beaten down value funds. The Indian Fund (IFN), a closed-end mutual fund that invests mainly in Indian stocks and short-term cash holdings, may be poised for a strong comeback in 2007.
The India Fund Objective
The Fund’s investment objective is long-term capital appreciation by investing primarily in the equity securities of Indian companies. Under normal market conditions, at least 80% of the Fund’s total assets are invested in equity securities of Indian companies. (Source: Blackstone Mutual Funds)
- Blackstone is committed to earning long term gains on your investment, which means they are likely to invest in low to medium risk Indian companies. Judging from the Top Holdings, a large portion of capital invests in two stable sectors of growth – finance/banking and computer technologies. Blackstone investors aren’t chasing small cap Indian stocks all day.
- 27% closed-end fund turnover rate – A low turnover rate signals that Blackstone managers’ are making thoughtful investments with an intended purpose. High turnover rates reveal negative sentiments to investors. Simply put, poor mutual fund managers trade fund equities excessively to make more money from management fees. This process is known as “churning.”
The India Fund: Key Holdings
- Infosys Technologies, Ltd. (INFY) – If you recall an earlier entry by guest blogger Ryan Donnell wrote an interesting post on Infosys some time ago. INFY could be headed for $60.
- Tata Motors (TTM) – I own shares in Tata Motors Limited, Indian’s largest automaker. Since only 60% of Indian residents own automobiles, automobile sales growth has been strong in the past 3 years. Tata Motors is a stock on my current buy list.
- Reliance Industries Ltd (RELLF) – India’s robust population growth requires a massive energy output. What better way to capitalize from India’s economic surge than to invest in one of India’s most profitable oil and gas refiners.
Think Like A Contrarian Investor
The Indian Fund has taken a rough beating lately. IFN went on a run, but has now returned to October 2005 price levels. IFN will be rediscovered once the bombay stocks reverse the tide. Could be weeks. Could be months.
- Good Bang For Your Investment Buck – 1.14 Price/Book ratio signals close to fair market value prices for IFN shares. It’s difficult to find BRIC mutual funds that trade near or at book value.
- India Economic Growth is here to stay – With over 1 billion people residing in India, we realize the economic potential is there. Even though short term Bombay stock market trends point south, the future looks bright for Indian stocks in 2007.
Bottom Line: The Indian Fund (IFN) offers investors the opportunity to own a diversified equity stake in Indian companies without the added risk of holding individual stocks.
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