The Hindu Business Line : Franklin India Flexicap: Hold

INVESTORS in the new fund offer of Franklin India Flexicap can retain their holdings. The fund has delivered an impressive performance since its launch in March this year, doing better than such well-established peers as Franklin Bluechip and Franklin Prima.

A focus on large-caps has helped the fund do well. Investors should, however, observe its performance during phases when mid-caps outperform large-cap stocks before they contemplate fresh exposures.

Flexicap has the mandate to invest in stocks across market capitalisations. This strategy makes it more actively managed than typical diversified funds that position themselves as large- or mid-cap funds. Funds such as Bluechip that have stuck resolutely to their mandate of investing only in large-caps have underperformed its peers during mid-cap driven bull phases.

The absence of such restrictions could help funds such as Flexicap stay ahead on the performance charts. But taking a call on the likely performance of large-caps versus mid-caps would be another decision the fund manager would have to get right. This increases its risk profile.

Performance: Over the past six months, Franklin Flexicap has emerged as one of the top performers. The fund's return over this period of about 35 per cent outpaces that of HDFC Premier Multi-Cap and Kotak Opportunities by more than 10 percentage points.

Franklin Flexicap has maintained a large-cap bias during this period. With an asset base of nearly Rs 2,000 crore, Flexicap is among the larger equity funds and the tilt is only to be expected.

With large-caps lapping up the attention over the past few months, the focus has paid off; between April and now, the Nifty has delivered about the same return as that of the CNX Midcap.

Investors would, however, have to observe the fund's performance during phases when mid-caps race ahead of large-caps. Given the size of the fund, it could find it tough to invest in companies that have a small market capitalisation, a problem that its counterpart Prima encounters.

Portfolio overview: The assets are invested in as many as 60 stocks. The top ten holdings comprise frontline stocks across sectors and account for about 40 per cent of the total assets. The fund takes focused exposures to sectors. The top three sectors — finance, auto and IT — constitute 40 per cent of the total assets.

Outside the top ten holdings, the stocks of IDFC, Indian Hotels, Tata Tea, Tata Chemicals, Gateway Distriparks and Bharat Electronics figure prominently in the portfolio.

Fund facts: Franklin Flexicap was launched in March 2005. Dividend and growth options are available. The minimum investment amount is Rs 5,000.

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