Mutual Funds

Franklin India Prima: Buy

K Venkatasubramanian | Updated on September 28, 2014

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The fund takes a low risk route to mid-cap returns

The mid-cap pack has rallied well over the past one year. But mid-cap indices are yet to touch their all-time highs, in contrast to their large-cap counterparts.

Among the relatively safer and steadier schemes in the mid-cap space, Franklin India Prima is a quality name where investment can be considered with a time horizon of at least five years.

It reduces risks by taking diffused exposure to individual stocks and sectors as well as by taking cash calls. The fund also adds some large-caps to its portfolio to tone down the risk profile, though the proportion is kept to less than 15 per cent most of the times.

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 10-12 percentage points. It has also convincingly beaten the BSE Mid-cap index. In the last three years, the fund has delivered compounded annual returns of 30.4 per cent, which is higher than IDFC Sterling Equity, DSPBR Small and Midcap and BNP Paribas Mid-cap.

Investors can use the scheme as a diversifier . The SIP (systematic investment plan) route, too, can be used.

Portfolio and strategy

Franklin India Prima tends to play it safe. Exposure to individual stocks is generally restricted to 3-4 per cent even for its top holdings. It maintains a portfolio of over 50 stocks.

The fund has ensured adequate participation during market rallies and has managed to contain downsides quite well. The scheme also keeps 7-9 per cent of its portfolio in cash and debt.

The fund has maximum holding of banking stocks, though, exposure has been trimmed in the last one year. The fund had increased exposure to auto ancillary and industrial products stocks over the past year, thus gaining from their rally.

Software and pharma are other key holdings as the mid-cap stocks in these segments still offer reasonable value picks and are expected to be helped by a relatively stable rupee against the dollar.

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

Franklin India Prima has delivered compounded annual returns of over 21 per cent over its nearly 21-year history.

Published on September 27, 2014

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