Franklin India Prima: BUY

Mid-cap stocks have run up in recent times but valuations still tend to be moderate, with scope for capital appreciation from stocks across a range of sectors.

Franklin India Prima is a mid-cap fund that can be considered for investment with a five-year perspective.

It reduces risks by taking diffused exposure to individual stocks and sectors as well as by taking cash calls.

By investing in a combination of value and momentum stocks, it has delivered above-average returns over the long term. Franklin India Prima may not be the best, but it usually beats the category average and stays in the top-to-mid rankings of mid-cap funds.

Over one-, three- and five-year timeframes, the scheme has outperformed its benchmark — the CNX 500 — by a margin of 6-9 percentage points. In the last three years, the fund has delivered compounded annual returns of 10.5 per cent, which is higher than IDFC Sterling Equity, DSPBR Small and Midcap and Canara Robeco Emerging Equities.

Investors who wish to park funds in a relatively low-risk mid-cap scheme can bet on Franklin India Prima, which can act as a diversifier to the portfolio. The SIP (systematic investment plan) route, too, can be used to take exposure to the fund.

Franklin India Prima, though a mid-cap fund, tends to play it safe. Its allocation to individual stocks is generally not more than 3-4 per cent. It maintains a portfolio of 55-60 stocks which means that it is diversified and also fairly resilient to broader market shocks.

The fund has ensured adequate participation during market rallies and has managed to contain downsides quite well during corrective phases. The scheme also keeps 7-8 per cent of its portfolio in cash and debt, which ensures that downsides are protected when markets correct.

Banks have always been at the top of the pile of sectors that the fund holds, though exposure has been trimmed in the last one year. The fund has increased exposure to software stocks.

Most mid-cap IT companies still trade at attractive valuations and have met financial expectations.

Pharma is another key sector that has performed well and benefited from the weak rupee.

The industrial products sector is an interesting addition to the portfolio and allocations have been increased in the past year.

Pidilite Industries, Amara Raja Batteries, Mindtree, Federal Bank, IPCA Labs and Torrent Pharmaceuticals are some of the fund’s top holdings.

Franklin India Prima delivered compounded annual returns of over 19 per cent in its 20-year run.

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