Investors can buy the units of Franklin India Bluechip Fund (Franklin Bluechip), given its long-term track record of delivering steady returns. Over one-, three- and five-year timeframes, the fund has outperformed its benchmark, the BSE Sensex.

The fund's large-cap focus may pay off in the current market environment as such stocks have better earnings visibility and limited volatility. After the slowdown of 2008-09, large-caps from the Sensex, Nifty and BSE-100 baskets have done better than the broader market.

Even otherwise, the fund's performance since its inception in 1997 has been quite robust and it may be suitable for inclusion in an investor's core portfolio. Investors can consider a SIP (systematic investment plan) in this fund. This strategy may hold a better chance of beating the Sensex, as units would be bought during the lows and highs of the markets.Over the last five years Franklin Bluechip has delivered a compounded annual return of 13.5 per cent, which places it among the top quartile of funds in its category. The performance has improved significantly over the last three years, with its returns placing it among the top few. Franklin Bluechip has contained downsides well in the protracted fall of 2008-09 and has also participated in the subsequent market rally.

Portfolio and performance : In the rally of 2007, led by mid-cap stocks, the fund underperformed. This was also because Franklin Bluechip had limited exposure to the construction, metals and capital goods sectors, which were the stars of the rally. But the level of underperformance was just a percentage point compared with the Sensex.

Over the last few years, the fund has exposure to sectors such as banks, software and petroleum products. While stocks in these sectors did fall during the correction, the extent was far less compared with the sectors that fell after a terrific rally in 2007. In the subsequent rally too, banks and software continued to have a fantastic run. In terms of sector selection, valuations have remained an important criterion for the fund. So, even though contrarian, recent portfolios have seen the fund increase exposure to telecom and capital goods, while consumer non-durables and pharma have been accorded lower weights.

Across market cycles, Franklin Bluechip has remained invested fully in equity, with cash levels going up the extent of only about 8 per cent of the portfolio during heavy market falls. This, coupled with a value approach, has helped it post sustainable returns. The fund has generally sought to de-risk its portfolio by including a large number of stocks typically 40-45. Individual stocks generally account for less than five per cent of the overall portfolio.

Over the last couple of years, the churn in its portfolio illustrates the valuation calls it took. Over this period, GSK Pharma, ITC, Nestle and even Axis Bank have been dropped, while stocks such as Bharti Airtel and Idea Cellular have been retained. In recent months, the fund bought Dabur India, Union Bank of India and Coal India, which suggests a strategy of picking up market underperformers with sound fundamentals.

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