Investors can invest in the Franklin India Flexicap Fund. The fund, which tends to shift dynamically between stocks of different market capitalisation, has got its allocation calls quite right over the last few years.

Over a three-year and five-year period, the fund has convincingly beaten its benchmark, the CNX 500. It has been able to contain downsides too, despite the presence of the more volatile mid-cap and small-cap stocks.

In a one-year time-frame, though, the fund has only barely squeezed past its benchmark. In the year gone by, mid-cap and small-cap stocks soared, while large-cap stocks had a more sedate run. The fund’s 70 per cent-plus exposure to large-caps in this period capped its returns.

This may, however, turn out to be a prudent strategy in the longer term with valuations of mid- and small-caps running still well ahead of large-caps.

The fund’s sector calls have also been on the conservative side with limited exposure to fast-moving consumer stocks while including smaller pharma plays such as Ipca Labs.

The fund is suitable for investors with a moderate risk appetite, given the exposure to mid-cap and small-cap stocks which can go up to 70 and 40 per cent, respectively, of the portfolio. On a five-year rolling return basis too, the fund has beaten the benchmark seven out of ten times, suggesting good consistency in returns.

Performance : Over a three- and five-year period, the fund has notched up an annual return of 7.8 and 3.3 per cent. The returns are depressed because of the market peak five years ago.

But the fund beat the CNX 500 by four percentage points. In the past one year, it has eked out returns of 20 per cent, in line with its benchmark’s 19 per cent. The fund has performed better than peers such as Kotak Opportunities and HSBC India Opportunities which also invest across market caps. It is, however, well below diversified funds such as HDFC Equity.

Portfolio : From early 2011 onwards, the fund began to pare holdings in small-cap stocks in favour of large-caps. Similarly, during the bull-run between March 2009 and November 2010, the fund’s reliance on mid- and small-cap stocks helped it beat the benchmark. The fund picked up strong performers such as HDFC Bank and Grasim Industries during the market lows in 2008-09.

Over the past year, the fund gradually added bank stocks with the sector now accounting for 21 per cent of the portfolio, increasing holdings in private sector banks such as Axis Bank, ICICI Bank and Yes Bank. The pharma sector too found favour, forming the next biggest chunk of 13 per cent. Both calls were spot on, with these sectors leading the rally.

The fund recently began stocking up on the auto sector, bringing the holding back to levels held in early 2010, when auto stocks were doing well. While it has slightly increased its meagre holdings in power stocks, the fund has otherwise stayed well away from the infrastructure space.

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