group repositions indian fund range in anticipation of rule changes
Franklin Templeton is to offer its range of Indian funds to the offshore market through its Mauritius base and via third-party distributors.
The move comes as changes are being considered to the Indian investment rules, which currently disallow non-Indians from investing in domestic funds and non-resident Indians (NRIs) from doing so without a tax penalty and even prevent fund managers of domestic money from operating abroad.
By going through feeder funds in Mauritius, the NRI market can now access two of the funds in the domestic range, the Franklin India Bluechip and Templeton India Income portfolios.
In an indication of the popularity of the Indian stock market, Franklin Templeton is also in the process of distributing one of its funds in Scandinavia through a large Swedish financial institution in a white-labelling scheme.
According to Harshendu Bindal, head of NRI product development at Franklin Templeton, the constrictive Indian laws are set to change in the next few months. The changes will allow NRIs to invest directly in domestic Indian funds without penalty but the offshore versions of the two funds will still be marketed to international investors.
The first feeder, the Franklin India Bluechip Offshore fund, was launched in 1993 and is managed by Siva Subramanian. The portfolio invests in well-established, large-cap stocks and holds 20-25 companies. Subramanian looks for firms that are focused on creating wealth and may include those from sectors that are out of favour.
Companies held include IT consulting service provider Infosys, banking group SBI and tobacco company ITC. Sectors include commodity chemicals, aluminium, oil and gas refining and IT consulting and services.
Templeton India Income Offshore was launched in 1997. Portfolio investments in this fixed interest fund include Reliance Industries, Hindalco Industries as well as 91-day Treasury bills.