Franklin India Flexi Cap: Buy

If you are looking for a fund that invests in a blend of large- and mid-cap stocks without undue risks, Franklin India Flexi Cap is a suitable choice.

Over one-, three- and five-year timeframes, the fund has outperformed its benchmark, the CNX 500 index. The level of outperformance has been to the tune of 5-7 percentage points over the long term. Over the last five years, it has also been ahead of peers such as Canara Robeco Equity Diversified, ICICI Pru Top 200 and DSPBR Opportunities.

Being a multi-cap fund, it follows a strategy that is ‘in between’ a mid-cap heavy Reliance Equity Opportunities and a large-cap heavy Birla Sun Life Frontline Equity, thus reducing risks while being able to participate in broader market rallies.

Investors with a time horizon of five years or more can buy units of the fund, preferably through the systematic investment plan (SIP) route.

The scheme takes concentrated exposure to select stocks, but not risky bets. Franklin India Flexi Cap has used its ability to shift across market caps adroitly across market cycles.

In early 2010, a period of robust earnings growth for India Inc, the fund had up to 30 per cent of its portfolio parked in mid-caps (market cap of less than ₹7,500 crore). But by early 2012, as earnings growth began to slow and economic conditions turned more risky, the fund scaled down exposure to mid-caps to below 20 per cent.

In the recent rally, in the initial phase, it again hiked mid-cap exposure, but is now back to 20 per cent levels given uncomfortable valuations in many stocks.

In terms of sector choices, banks have consistently topped the portfolio. The scheme has increased exposure to auto and auto ancillaries as well as telecom.

The share of power sector stocks, though, has been trimmed given the many financial and legal woes the segment faces. Pharma has been another key holding and so has software, which together act as effective defensives in volatile markets.

YES Bank, Bharti Airtel, ICICI Bank, Torrent Pharma and Amara Raja Batteries are some of its key holdings. US-listed tech player Cognizant Technology Solutions, which has delivered extremely well over the past few years, also finds a place among the fund’s key holdings.

Exposure to individual sectors is largely less than 10 per cent. Invest in Franklin India Flexi Cap for above-average returns over the long term and relatively lower risk profile for a multi-cap scheme.

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