Franklin India Flexi Cap: Consistent record: INVEST: Business Line

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Investors planning to add a flexi-cap fund to their portfolio can consider Franklin India Flexi Cap Fund. Besides consistent track record, the fund scores in its ability to protect downside during market corrections despite presence of mid- and small-cap stocks in the portfolio. The fund, over a three- and five-year period, clocked compounded annualised return of 12.4 per cent and 12.7 per cent, respectively, and outpaced its benchmark CNX 500 by seven and three percentage points, respectively. However, it trailed one of the top funds, HDFC Equity, by about six percentage points over a three- and five-year period.

The fund has a superior return record through the SIP route over the above period suggesting that it tends be volatile. Investors willing to take exposure to the fund can phase out their investment through SIPs. Though it has bettered its multi-cap peers, its exposure to mid- and small-cap stocks failed to reward investors for the risk assumed, especially post the market correction. Hence the fund can be considered as a diversification option.

Performance: The fund clocked an absolute return of 12.3 per cent, over a one-year period, outperforming its benchmark CNX 500 by seven percentage points. However, over a six-month period, its NAV was down by 5 per cent compared with 6.5 per cent lost by its benchmark. The fund's conservative exposure to sectors and stocks helps it to contain the losses.

Portfolio strategy: The fund has a well-diversified portfolio of 47 stocks. The top three sectors held by the fund — banks, IT and telecom — make up for as much as 44 per cent of its portfolio. Stock-specific exposure is restricted to 8.5 per cent of its entire portfolio. The fund's February 2011 portfolio sports a 68 per cent exposure to large-cap stocks while the mid- and small-caps make up for 25 per cent.

Though it had higher exposure to consumer non-durables at the start of 2009 market rally, the fund has systematically pruned its exposure to the sector since then. This could have partially dampened its returns. An exposure of 10 per cent to telecom, one of the underperforming sectors, may also have dragged returns