Franklin India Bluechip: Hold

Among the oldest and most respected of funds is Franklin India Bluechip. Once a top-quartile performer, the fund’s recent returns have seen it slip down the ranking charts.

Its one-year return of 30.5 per cent is significantly below the average 37.2 per cent returns of large-cap oriented funds, placing it in the bottom quartile. It is, however, a shade above the Sensex’s return of 28.8 per cent.

A somewhat constrained mandate to mostly invest in very large companies from the Sensex or the Nifty baskets hasn’t helped matters.

But Franklin Bluechip has a strategy of sticking to quality companies with healthy balance sheets, close attention to valuations, as well as avoidance of sectors driven by momentum.

The fund is, therefore, liable to perform badly in momentum-driven rallies but picks up over the long term. Over a five-year period, the fund’s returns are above both the benchmark Sensex and the category average. In the three- and five-year periods, Franklin Bluechip ranks in the mid-quartile.

In the light of its impressive long-term track record, investors in the fund can retain holdings and wait it out a bit longer for performance to perk up.

But until the fund does better its returns, fresh investments can be avoided.

While the fund has a relatively long list of stocks in its portfolio, the top 10 stocks hold about half the share. That makes fund returns susceptible to poor performance of a few stocks.

The sedate Infosys and Bharti Airtel, for instance, had a 13.9 per cent share in the current portfolio, which could have muted the one-year performance. Similarly, stocks such as Reliance Industries, Grasim Industries and Dr Reddy’s Labs were poor market performers.

It shines during market downturns too. In the 2011 bearish phase, for instance, Franklin Bluechip lost almost 7 percentage points lesser than the Sensex. Franklin Bluechip has held about 6 to 8 per cent of its portfolio in cash over the past three years owing to the volatile market. Equity allocation has been stepped up since the start of this calendar.

Holdings in private sector banks have moved up, with these banks better placed to grow than their public sector peers. Banks have also been the preferred top sector for several years now.

In crude oil and natural gas, and refineries — themes that ride on a bounce-back of the economy — the fund was an early entrant, adding to holdings from early 2013.

The share of infrastructure too has been upped. In power, though, the fund has been cutting back, removing NHPC and reducing NTPC.

Franklin Bluechip also has exposure to automobiles and paints, two consumer discretionary sectors that can gather pace in the coming months.

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