Mutual Funds

Franklin India High Growth: Invest

K. Venkatasubramanian | Updated on March 10, 2018

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The scheme’s investments clearly seem to reflect its adherence to the best trade-off between growth, risk and valuation.

In the current volatile markets, investor preference is increasingly tending towards quality large-cap stocks.

But there are quality mid-caps with sound fundamentals that may still be worthwhile to bet on, along with large-cap stocks.

In this light, investors can buy the units of Franklin India High Growth Companies, a multi-cap fund which has a steady performance track record.

Essentially, the fund seeks to invest in a set of stocks “that offers the best trade-off between growth, risk and valuation”, going by its mandate.

The scheme’s investments clearly seem to reflect its adherence to this dictum as far as its choice of companies goes.

Franklin High Growth has managed to beat its benchmark CNX 500, over one-, three- and five-year time-frames. The level of out-performance has been to the tune of 3-4 percentage points across market cycles.

In the last five years, the fund has delivered compounded annual returns of 7 per cent which is the returns that quality diversified equity funds have managed over this period.

Of course, Reliance Equity Opportunities, a multi-cap fund, has delivered superior returns, but takes greater risks.

Franklin High Growth balances growth and risk and hence the returns it delivers are above-average, but not spectacular.

Given the growth focus of the scheme, investors may need to stick on for about five years for significant capital appreciation.

Portfolio and strategy

Franklin High Growth invests 35-40 per cent of its portfolio in mid-cap stocks (less than Rs 7,500 crore market capitalisation), which somewhat increases the risk profile of the fund.

But its choice of stocks gives comfort. So quality stocks with sound earnings trajectory such as Federal Bank, MindTree and Amara Raja Batteries find their place in the portfolio.

Even among large-caps there is a growth bias, but the bet is on solid names.

An example would be Idea Cellular which is still expanding in several service areas and yet is among the largest telecom players.

Banks, pharma and telecom are the sectors that have been among the top few segments held by the fund. Though it did not go heavy on consumer non-durables, in light of the high valuations in that sector, the fund’s returns have not suffered over the past 12-18 months.

Franklin High Growth also takes significant cash and debt positions when the markets turn volatile.

This can be to the tune of 8-9 per cent of the portfolio, which cushions NAV erosion during corrections.

Overall, the fund has managed to balance risk and returns over the long-term.

Investors looking to ride out market cycles and average costs can take exposure to the fund through the SIP (systematic investment plan) mode for a period of least 3-5 years.

Published on May 25, 2013

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