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.
*Share your thoughts and opinions on The Indian Fund (IFN). The best comments will be featured on my Investing in India page, along with a link back to your blog/website.
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We are definitely in favour of a contrarian approach that is why we are investing in the unfashionable uranium sector. The fund above looks dull to us and lacking imagination.
We wish them well but do not see a great upside for Tech or Motor stocks. The refining element may do well in the short term, however the future is clear, it is nuclear.
I agree that nuclear is the future, but that has nothing to do with the growing Indian infrastructure. Neither does the degree of imagination. I believe there is great upside for Indian Tech and Motor stocks because these markets are constantly growing, due to high demand. Whereas Nuclear investing is a raw, undeveloped market.
Another reason why I recommended the fund is because the fund price has bottomed. On the Day I posted this, shares traded at $36. Now, they are at $39. Of course, these gains could be merely short term, but the fund was undervalued before the 02/27/2007 Market fall. Now, it’s bouncing off its 52 low. It’s a bargain fund.
I don’t care about imagination. I care about quality and results.
Could someone tell me why the IFN is doing so poorly when it appears India’s economy continues to do so well? thank you
By the results you would think the IFN managers were buying and selling Home Depot stock each day…the fees justify someone who can get move this closed end fund upward.
India’s economy has slowed down a lot since 2006. The Bank of India raised interest rates to curb inflation, and their economy is projected to grow at only 6 to 8% in 2007. Plus the Bombay stocks as a whole were hit pretty hard in late February.
I don’t think there’s anything wrong with the mutual fund. The problem is that investors haven’t realized its true intrinsic value.
If you bought into the mutual fund, don’t worry about short term sentiments. We all know India is growing rapidly every year, due in large part to its growing business infrastructure. I cannot forsee the future, but I wouldn’t be too worried about India’s growing economy in the long run.
First India has to pass over it’s inflation worries…this fund is years off…..there are much better funds if that is what you are interested in.
Hi , very nice and interesting post
Well money should never be kept idle. It is very important to invest our money in funds where we get good sum of returns. I have invested my savings in the best fund after studying the fund top to bottom. I selected “Select Mid Cap”,investing in midcap stocks that have the potential to become the market leaders of tomorrow. I am very happy with the performance.
Regards,
Aaradhna