Mutual Funds

Franklin India Flexi Cap: Sporting a cap of consistency

K Venkatasubramanian | Updated on January 24, 2018

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The fund has been improving steadily and handling market volatility competently

Investors looking for a scheme that has a large-cap bias but also takes significant mid-cap exposure in order to benefit from broader market rallies can consider Franklin India Flexi Cap.

While it does take a multi-cap approach to stock selection, the risk profile is still tempered as the exposure is to quality names. Further, cash calls are taken during volatile markets to contain downsides.

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 6-9 percentage points over the long term. Over the last five years, it has also been ahead of peers, such as Canara Robeco Equity Diversified and DSPBR Opportunities.

Given its steadily improving performance, investors with a time horizon of five years or more can buy units of the fund. Investments can also be considered through the systematic investment plan (SIP) route.

Portfolio and strategy

Franklin India Flexi Cap takes exposure to its top individual stocks to the tune of 5-7 per cent. These are mostly in established large-cap names. Mid-cap exposures generally are not part of the top few stocks of the portfolio.

About five years ago, the fund had up to 30 per cent of its portfolio parked in mid-caps (market cap of less than ₹10,000 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. Currently, this proportion has further been pruned to 15 per cent, given the volatility in the markets and the swift price rise of mid-cap stocks.

The fund also tempers risks by taking cash and debt calls to the tune of 6-7 per cent of the portfolio. In terms of sector choices, banks have consistently topped the portfolio. The scheme has increased exposure to pharma stocks in recent months, given the robust growth prospects in the segment. Some pruning has been done in segments, such as auto and auto ancillaries, construction projects and telecom. Interestingly, despite the concerns that surround the sector, software still figures among the top sectors held.

HDFC Bank, L&T, Dr Reddy’s Labs, 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. Invest in Franklin India Flexi Cap for above-average returns over the long term and relatively lower risk profile for a multi-cap scheme.

Published on July 11, 2015

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