The Hindu Business Line : Franklin India Flexi Cap Fund: Invest

Investors with a long-term horizon can consider adding Franklin India Flexi Cap Fund to their portfolio. Besides a track record showcasing consistency , what also strengthens the case for investing in this fund is its improved scorecard in recent times.

Having lagged in performance compared with peers such as HSBC India Opportunities and HDFC Premier Multi Cap just six months ago , the fund has since sprung back into action quite impressively. It has now beaten both these funds by a decent margin on a one-year and three-year time frame. That its one-year returns also beat that of its benchmark, CNX 500, a tough index to benchmark with, also instils confidence. However, given the increased volatility in its monthly returns, the fund need not form part of an investor’s core portfolio. It can, instead, be considered as a diversification option.

Investors can also consider phasing out their exposure to the fund by way of SIPs or through buying small lumpsums on market dips.

Performance: The fund has contained losses to about 31 per cent and 10 per cent over one- and three-year periods, respectively. While the onset of the bear market saw the performance slacken in the first half of 2008, it has since then done well to keep pace with both its benchmark and peer funds.

That the fund donned a predominantly large-cap focus, even though it had the flexibility to invest across the entire market capitalisation range may explain its improved performance in recent times. Well-timed sector bets — such as upping exposure to defensives such as consumer non-durables and pharmaceuticals while systematically pruning holdings in capital goods — even as it maintained a high exposure to banks may have also helped the fund better its performance. As the fund has earlier proved its mettle in participating in secular rallies, there could be lower concerns on its ability to participate well if the broad markets chose to trend further up from hereon. In this context, given that the fund is fully invested in equities (in line with the AMC’s broad strategy) but for a 6 per cent cash exposure may also help.

On a monthly rolling return basis, the fund has, in the last three years, outperformed its benchmark only half the number of times. But what lends comfort is that the average margin of underperformance wasn’t significant.

Portfolio: A large-cap bias with a focused sector-specific approach best describes the fund’s latest portfolio. Its March 2009portfolio sports a 65 per cent exposure to large-cap stocks, while mid (20 per cent) and small caps (9 per cent) make up for the rest; it also has a 6 per cent exposure to cash and equivalents.

In terms of sector exposure however, the fund appears to have adopted a focused approach. The top three sectors held by the fund — banks, telecom and consumer non-durables — make up for as much as 43 per cent of its entire portfolio. Stocks from the cement and oil and gas sectors were recent additions to the portfolio.

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