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As a play on safe large-cap bets, together with a long and consistent track record, Franklin India Bluechip might be a good choice for investors looking for steady above-average returns over the long term.
The scheme has been around for more than 21 years and has been a quality performer. Given its relative underperformance in 2012 and 2013, we had given a hold recommendation on the fund. But Franklin India Bluechip seems to have found its feet once again and has picked up in performance over the past year-and-a-half and broken back into the top quartile of its category.
Over one-, three- and five-year timeframes, the fund has performed better than its benchmark, the Sensex. Its outperformance has been to the tune of 3-4 percentage points over the long term.It has done better than the likes of DSPBR Top 100 Equity, IDFC Equity and HDFC Top 200 over a five-year period.
Over the years, the fund has taken minimal risks and has contained downsides very well, while ensuring reasonable upside participation when markets rallied. With a blend of defensive and cyclical bets, together with cash calls being taken when markets turn volatile, Franklin India Bluechip has mostly struck to value-based investing.
Investors can take the systematic route to buying units of the fund, while having a time horizon of at least five-seven years.
Portfolio and strategy Franklin India Bluechip invests only in large-cap stocks from the Sensex, Nifty and, at times, from the BSE 100 baskets. It sticks to this mandate even when mid- and small-cap stocks witness massive rallies. While this can lead to short-term underperformance, over longer timeframes, the scheme has delivered category-beating returns.
The scheme takes cash and debt calls to the tune of 8-9 per cent of the portfolio when markets correct sharply or turn volatile. In terms of sector holdings, banks have always been the most favoured, given the heavier weight they hold in the index. Software too figures prominently, though exposure has been trimmed over the past several months. In fact, the fund was late in paring bets in the troubled software segment, which led to its underperformance earlier. It has also trimmed exposure to the pharma as well as the telecom segments. Bets on auto and cement sectors have been increased.
Franklin India Bluechip thus manages a blend of cyclicals and defensives, though the tilt now is towards the latter space.
HDFC Bank, Infosys, the US-listed Cognizant Technology, Bharti Airtel, Indusind Bank and Dr Reddy’s Labs are some of the key holdings of the fund.
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