REITERATION OF MY VIEWS ON TEMPLETON INDIA SHORT TERM PLAN
Kindly refer to my notes on Templeton India Short Term Plan which I had written on June 11’2009 (TWO SHINING PERFORMERS IN SHORT TERM PLANS EVEN DURING THESE VOLATILE TIMES) & on July 07’2009 (ACID TEST FOR SOME OUR RECOMMENDATIONS IN SHORT TERM PLANS).
In both these notes I had recommended investment in Templeton India Short Term Plan which has been consistently maintaining lower average maturity with higher Gross Yields ( without compromising on credit). Following portfolio break up as on October 29’2009 will highlight the same:
|
Composition by Assets
|
|
| Corporate Debt | 37.42% |
| Money Market Instruments | 15.48% |
| Other PTC | 1.59% |
| Pool PTC | 16.96% |
| Single Loan PTC | 5.29% |
| Call, Cash & Other Current Assets # | 23.26% |
|
Composition by Rating
|
|
| A1+/AAA/AAA (ind) (SO)/AAA (SO)/LAAA/LAAA (SO)/P1+/PR1+ | 59.39% |
| A1/AA/AA-/AA (Ind)/AA (ind) (SO)/AA+/AA+ (SO)/LA+/LAA/LAA-/LAA+ | 38.18% |
| A | 2.43% |
|
Fund Details
|
|
| Average Maturity | 0.91 |
| YTM | 6.46% |
| Modified Duration | 0.85 |
CURRENT MARKET OUTLOOK AT THE SHORTER END OF THE CURVE:
- Overnight rates continue to hover between 3.20% to 3.30%
- Systemic liquidity continue to be in excess of Rs.1.2 lac crs
- Unabated FDI/FII flows increasing liquidity in the sytem
- Government spending generally on the higher side; thereby infusing further liquidity
- Inspite of the imminent hike expectations in CRR over the next few years; will not have much dent as even 1% hike can only suck out approx. Rs.45000 crs from the system. Hence, systemic liquidity likely to continue even after CRR hike ( as & when that happens)
- Post CRR hike, there might be a slight bpil on the lower end of the curve; but likely to settle down post that
- Liquidity premium will be on lower side due to lower than expected credit offtake in this quarter
- Steep Yield Curve gives ample opportunity to Fund managers to lock in higher returns without taking undue duration calls:
| 1 day | 3.25% |
| 1 yr CD | 5.35% |
| 3 yr Bond | 7.50% |
| 5 yr Bond | 8.25% |
- Also higher cash component of close to 23.50% will keep them in good stead as & when rate hikes are announced in the near future
- Due to higher cash component their Gross yield currently has come down from 8% to 6.46% ; however the same will improve as & when shorter end of the curve starts inching up post any rate hikes or CRR hike
To reiterate what I had mentioned in my note on Templeton India STP on June 11’2009 ( which is valid even now) :
“In these days of a) Volatile interest rates & b) falling rates at the shorter end, it is difficult to outguess the markets and position your portfolio accordingly. Long end of the curve is becoming volatile with supply concerns and short end of the curve is accruing less and less gross yields; therey making it difficult for investors to choose the right asset class and right scheme under that asset class.
Longer average maturity portfolios are creating MTM havoc on quarter ends and short term schemes are accruing less and less in their portfolios due to falling rates at the shorter end. Investors are vary of taking credit calls to enhance gross yields. Pass Through Certificates ( PTCs) or Asset Backed Securities ( ABSs) are treated as taboo for investment consideration (even though they are capable of accruing higher YTMs).”
Returns as on November 06’2009 will once again confirm their consistency in performance:
| RETURNS AS ON NOVEMBER 06’2009 |
15 Days
|
30 Days
|
88 Days
|
179 Days
|
| Templeton India Stp -Inst |
12.53
|
9.76
|
8.64
|
11.52
|
I would strongly recommend investment in the said scheme with 6-9 month view.
Comments
Thanks for your view on Templeton India Short Term Plan.
Lately HDFC High Interest Fund – STP has also been doing well.
Will appriciate your view on this fund, spl. quality of portfolio. This fund has exit load of 1 month only.
On 29/30-07-09 and 21-08-09 you had analysed FORTIS FLEXI DEBT Fund and indicated investment horizon of > 6 month.
From 31st July’09 and now the NAV of the fund has remained static (15.58), and in-between was even giving negative return. Last six months annualized return of the fund is 5.60%
Whereas, in the same period Templeton India STIP and ICICI Pru Income Opportunities Fund have given annualized about 10% return.
As you had indicated in your analysis in July that the fund size had grown from 70 Cr. To 350 Cr. And that “Lower the corpus, better the ability for Fund Manager to churn the portfolio & create alpha” but the Fund size in Nov’09 the stands at 506.77 Cr.
Against the above, it will be highly appreciated if you can kindly analyse the fund’s performance once again and give your valuable advice.
Regards,
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