The Hindu Business Line : Franklin India Bluechip Fund: Invest

New investments can be considered in Franklin India Bluechip Fund, based on fund’s good long-term track record. After suffering a setback to its performance (relative to its benchmark and peers) in 2007, the fund made a comeback during the next year and a half. Not only has it contained declines to levels much lower than the category average and the benchmark during 2008, it has also delivered strong participation in the rally of 2009.

This has restored the fund’s three- and five-year records to healthy levels. Investors can consider adding the fund to their portfolio based on its strong focus on large-cap stocks. Over a ten year period, the Bluechip Fund generated compounded annualised returns of 18.2 per cent, five percentage points higher than the benchmark.

Though several of the large-caps have appreciated sharply in the ongoing rally, a majority of them continue to trade at levels far below their peak valuations, arguing in favour of the investment.

Being a strictly large cap fund, Franklin India Bluechip Fund has the potential to bring stability to overall portfolio. Though benchmarked against BSE Sensex, the fund invests in stocks outside this basket to achieve higher returns. The recent performance of the fund may match that of index funds, but its ability to invest outside the benchmark has the potential to reward investors over a long term.

The fund outpaced its benchmark returns by a big margin in its initial period. However, an increase in assets under management towards the Rs 2,000-crore mark in 2004 weighed on returns in 2005, though the fund continued to keep pace with its benchmark.

Thereafter, not only has the asset size declined due to the market correction, the investible universe for large-caps has also expanded substantially, allowing the fund to diversify and manage better stock selection.

Performance: The five-year returns on the Franklin India Bluechip Fund stand at an annualised 25 per cent while the three-year annualised returns are at about 12 per cent. Some of the large-cap funds such as Birla Sun Life Frontline Equity and DSPML Top 100 have managed returns that are 5-6 percentage points higher than Franklin Bluechip over a 3 year period. But in the past year the fund lost 8.6 per cent, containing losses much better than its benchmark- the BSE Sensex, a feat not managed by too many equity funds.

On a rolling return basis in the past 36 months, the fund has contained losses better than the benchmark close to 75 per cent of the times. The ability to contain the losses suggests a lower beta for the fund and this might step up the comfort level for conservative investors.

Portfolio Overview: The fund had 39 stocks in the April portfolio and the top ten holdings accounted for 51 per cent of the assets.

The fund’s lower portfolio turnover implies that the fund is not very aggressive in churning the portfolio. The fund pruned stocks such as Reliance Industries, Larsen and Toubro, HDFC and Hero Honda in the latest portfolio and instead it added Areva T&D and Hindalco.

The fund is managed by Mr Anand Radhakrishnan since April 2007.The minimum lump sum investment is Rs 5,000.

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