The Hindu Business Line : Franklin India Opportunities: Hold

INVESTORS in Franklin India Opportunities Fund may retain their exposures, as the fund's performance appears to be taking a distinct turn for the better, especially over the past six months.

We also believe that its portfolio, which has an offbeat tilt in the top 10 holdings, could deliver value even in a choppy market and/or in an environment where economic growth slows.

Mr K. N. Siva Subramanian now manages the fund; we view this as positive, as other funds such as Franklin Prima, Franklin Bluechip, Franklin FMCG and Franklin Flexi Cap have an impressive track record. The performance of Franklin Opportunities this year provides cause for optimism on this score. In this backdrop, investors have adequate reason for staying with the fund.

Franklin India Opportunities is now a diversified fund. It was earlier known as Franklin Internet Opportunities Fund, which invested in stocks of companies that were expected to benefit from the spread of the Internet.

It, too, had a fairly diversified profile but now the fund has a wider ambit. This change was made in March last year. The fund took a few months to shift the character of its portfolio and has since then turned in a fairly good showing.

Over the past year, the NAV gained about 55 per cent and over the past six months about 35 per cent. During the latter period, it figures as one of superior performers in the diversified funds' space. If this pace of performance is maintained over the next 12 months, it could well pitchfork Franklin Opportunities to the ranks of diversified funds which could be considered for investment, as it would lead to an improvement in its long-term track record.

The fund has an asset base of about Rs 300 crore, which should provide for considerable flexibility in investment management. The fund has a legacy cost from its earlier avatar that acts as a drag on its track record. It may be better to wait for it to notch up a credible track record in its avatar as a diversified fund.

Suitability: The fund has a somewhat high risk profile compared to a typical diversified fund, as it has a sizeable exposure to mid-cap stocks. Its exposures to the media sector also have the potential to enhance the risk profile.

Investors could stay with the dividend option due to its superior tax efficiency. A holding period of two years may be appropriate to capitalise on the likely improvement in the fund's performance.