The Hindu Business Line : Franklin India Flexi Cap

Franklin India Flexi Cap is an open-ended diversified equity fund with a mandate to invest in stocks across market capitalisation segments. Flexicap funds have the advantage of investing in stocks of large, mid and small cap categories.

These stocks have a tendency to perform differently through various economic and market cycles. Mid- and small-cap stocks, for instance, could move up sharply in short spells and are also prone to steep declines during volatility. On the other hand, large-cap stocks tend to be less volatile on account of higher liquidity.

For the six-month period ended March 2008 movements in the asset of Franklin India Flexicap reveal that the fund has witnessed outflows. During this time-frame, the assets under management dropped by 30 per cent while the fund’s NAV declined by 13.5 per cent.

Despite sporting a flexicap tag, this fund predominantly invested in large-cap stocks, which accounted for 80 per cent of the assets. With an asset size of Rs 2,510 crore the fund has invested in 24 sectors. But it takes concentrated exposures to a few sectors and, as part of diversification, has invested 15 per cent of the assets in 12 sectors.

The top three sectors account for 39 per cent of the portfolio. The fund went light on automobiles, banks, consumer non-durables, industrial products and capital goods, while it stepped up exposure to ferrous metals, finance, non-ferrous metals and telecommunication.

The fund cut exposure to Larsen and Toubro, BHEL and Bharat Electronics but held on to power equipment stock ABB without change in the holdings. The short run-up in the prices of banking stocks together with uncertainty over earnings growth prospects may have prompted the bank to trim holdings in Axis Bank and Kotak Bank along with ICICI Bank. It, however, stepped up exposure to mid-cap stocks Federal Bank and ING Vysya Bank.

A steep correction in Reliance Communication provided the fund an opportunity to accumulate the stock while exposure to Bharti Aitel was reduced.

In the auto space, the fund added afresh Hero Honda and Mahindra and Mahindra. The fund lost fancy for Maruti Suzuki, cutting exposure to it by more than 50 per cent. Auto ancillary stocks Pricol and L.G. Balakrishnan Brothers were reduced gradually.

Holdings in Cummins increased in March, taking it to the top ten. Exposure to Vesuvius India was, however, pruned substantially.

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