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It’s been a turbulent phase for Indian equities with benchmark indices Nifty and Sensex losing over 12 per cent in the last twelve months. But, interestingly, stocks of mid- and small-cap companies have not fallen as much as their large-cap counterparts did. The BSE Midcap Index and BSE Small Cap Index have lost only about 3 per cent and 6 per cent in the last year.
. This makes a good case for investing in multi-cap funds which have the flexibility to juggle allocation across market caps, helping contain downsides during corrective phases while making the most of relief rallies.
If you have the appetite for high risk and a holding period of at least five years, Franklin India Flexicap Fund is one multi-cap fund you can consider.
Right callsThe fund’s ability to snuggle into relatively ‘less volatile’ stocks and themes during volatile phases has helped it contain losses better than its benchmark. For instance, consider the November 2010-December 2011 period; the scheme’s NAV fell about 26 per cent compared with a 30 per cent fall in its benchmark Nifty 500 Index.
Increasing exposure to defensive themes such as IT (from 7.2 per cent in November 2010 to 16.4 per cent in December 2011) and pharma (from almost nil in November 2010 to 7.1 per cent in December 2011) helped the fund stay ahead of its benchmark.
At the same time, the flexibility to increase exposure to mid- and small-cap stocks during market rallies, has provided a leg-up to the scheme’s performance.
Consider the 2009-10 rally phase; the fund upped its mid-cap exposure from 37 per cent in March 2009 to 43 per cent by November 2009.
The fund’s returns during the relief rally phases have been significantly higher than those of the Nifty 500 Index. During the March 2009-November 2010 period, while the benchmark saw a 2.6 fold rise, the fund’s NAV jumped three-fold.
Well-balancedThe scheme scores well on consistency too. Its one-year rolling return in the last five years has been better than the benchmark almost 90 per cent of the time.
The fund held 44 stocks in its portfolio as of March 2016, well balanced between cyclical and defensive stocks.
Besides HDFC Bank (7.5 per cent) and YES Bank (6.25 per cent), which were the top two holdings, the fund has invested a little over 5 per cent in Nasdaq-listed Cognizant Technology.
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