Franklin India Prima Fund: Invest :: Business Line

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The fund did slip in the 2008-09 slowdown but bounced back to beat the benchmark in the 5-year term.

Investments can be considered in Franklin India Prima Fund (FIPF), which focuses on mid-and small-cap stocks. Over one-, three- and five-year time-frames, the fund has beaten its benchmark by a wide margin. Adding a few large-cap stocks to the mix helps cut the overall risk profile.

Most stocks in the portfolio are reasonably valued and have sound underlying businesses, making for safer bets. In the banking space, picks include Yes Bank and Federal Bank, while consumer company choices include GSK Consumer Healthcare and Bata India.

The average valuations of the January portfolio, in terms of price-earnings multiples, are at 18.4 times — in line with its benchmark BSE 500 and marginally below that of the BSE mid-cap and small-cap indices. But given the fund’s small- and mid-cap nature, investors who can take a higher risk can invest in FIPF.

PERFORMANCE

The fund’s one-year return, at 16 per cent, beats the CNX-500’s 6 per cent return hollow. Over three- and five-year periods, the fund’s returns are five percentage points above its benchmark. Performance is better than peers such as SBI Magnum Global and Religare Midcap Fund.

FIPF did slip in the 2008-09 slowdown, when it trailed the benchmark owing to early calls in sectors such as banking and high holdings in capital goods, which formed the second largest sector at 11-13 per cent for much of 2008, and among the top four sectors even after holding was pruned.

But performance has picked up since, with the fund containing losses in the 2011 downturn to 27 per cent against the CNX 500’s 31 per cent. On a five-year daily rolling return basis, the fund has done better than its benchmark about 85 per cent of the time.

STRATEGY

FIPF sports a large portfolio of over 50 stocks. It had been heavily invested in small-cap stocks (market capitalisation below Rs 2,500 crore) with over half the portfolio parked in such stocks for much of 2007. This was pruned subsequently and these stocks generally make up only around 20 per cent of the portfolio.

Instead, mid-cap stocks (Rs 2,500-Rs 7,500-crore marketcap), which hold lower risk than small-caps, found greater weightage of up to 30-40 per cent in the portfolio. Holdings in large-cap stocks too rose, with the share going up to 50 per cent in September 2011, when markets were sliding.

Banking and pharmaceuticals have been the fund’s top sector holdings for the past couple of years. Stocks such as Karur Vysya Bank, IndusInd Bank, Cadila Healthcare and Ipca Labs served it well.

Chemicals and auto ancillaries are other sectors where the fund has remained invested over the past three years with minor changes in holding. Picks such as Pidilite Industries, Amara Raja Batteries and Bosch turned out to be strong performers.

The fund raised holdings in media stocks, which turned outperformers in 2012. Holdings were gradually pruned in troubled sectors such as steel, brokerages, capital goods, infrastructure and power.