UPDATE 2-Templeton may invest up to $10 bln in Russia-Mobius

* Templeton veteran Mobius says increasing Russia weight

* Says emerging market AuM could double

* Favours RusHydro, seeks to buy more shares

By Simon Shuster (Adds Mobius comments on Russia returns, oil and commodity stocks)

VOLGOGRAD, Russia, July 29 (Reuters) - Templeton Asset Management may raise its investment in Russia five-fold to as much as $10 billion within two years, its veteran fund manager Mark Mobius said on Wednesday.

"We expect to have $50 billion under management (up from $24 billion now) ... within about two years. And theoretically 20 percent of that could be in Russia," said Mobius, who heads Templeton Asset Management's Emerging Markets Group.

He was speaking during a visit to a giant Stalin-era hydro dam run by Russian state giant RusHydro (HYDR.MM), a company in which Templeton has been increasing its stake.

"Before, purely driven by valuations, China and Brazil were cheaper. But now Russian stocks look cheaper so we expect Russian stocks to come up and become more important" in Templeton funds, he added.

The return on Templeton's Russian investments is seen at 10-15 percent annually, he said. The fund uses $70 per barrel oil in its models, although Mobius said he believed dips to $20 were not impossible.

"From the commodities we are considering Norilsk Nickel (GMKN.MM) and oil companies like LUKOIL LKOHL.MM," he said.

He also said Templeton could theoretically raise its stake in RusHydro to 10 percent from around 0.5 percent currently if there is funding, and forecast that Russian consumer stocks will do well in 2010.

According to Reuters data, Templeton more than tripled its holdings in RusHydro to 0.2 percent of the company at its last reporting date, March 31, 2009.

RusHydro is accepting bids until August 10, 2009 for a secondary share offer at 1 rouble par value. Of a 16 billion share issue, the state has already used pre-emptive rights to buy 4.9 billion and private investors 2.3 billion, leaving the rest for the offer.

The shares were trading at 1.0600 roubles at 1356 GMT on Wednesday, down 2.66 percent, in line with the market.

Templeton Chief Executive Dennis Lim, also visiting Volga Hydro Dam, Europe's largest, in the city formerly known as Stalingrad, said the fund was seeking to buy more shares through the offer. (Reporting by Simon Shuster; writing by Melissa Akin; editing by Simon Jessop and David Cowell)