Given its past performance and a wellcrafted portfolio, Franklin India Bluechip Fund is an ideal investment opportunity for conservative investors
FRANKLIN India Bluechip Fund is one of the oldest diversified equity schemes in India and among the largest as well. Launched in November 1993, Franklin India Bluechip Fund today ranks amongst the top 10 diversified equity schemes by size, with average assets under management of over Rs 3,000 crore. Its size clearly reflects its popularity among equity investors.
PERFORMANCE:
During its existence for over a decade, Franklin India Bluechip Fund has had periodic spurts of outstanding performances during 1997-99 and then again from 2002-04 when it outperformed the market indices by healthy margins.
However, barring these periodic bouts, Franklin India Bluechip has been an average performer with returns aligned to those of the broader market indices.
In fact, the fund is one of the no-nonsense funds that believes in the traditional philosophy of long-term investment in highly liquid and large companies and is thus suitable for investors with low risk appetite.
For instance, in 2006 and 2007, the two years of fantastic rally witnessed in the equity market, when many other diversified equity schemes have had startling performances, Franklin India Bluechip failed to impress its investors with returns that were highly correlated to the movements in the BSE Sensex.
The fund's abstinence from some of the high performing sectors such as real estate and infrastructure then could be construed as one of the reasons for the fund's abyssal performance. However, the very same investment strategy proved to be a boon in the following year when the market meltdown trashed the equity market by more than 50 percentage points.
Franklin India Bluechip, however, succeeded in curtailing its fall to about 48% in that year. In 2009 again, the fund delivered about 85% gains for that year, once again aligned approximately to those of the Sensex at about 81%.
A startling turnaround in Franklin Bluechip's performance, however, has been in the current calendar year as it returns about 5% gains since January against barely nil returns by the Sensex during the period.
PORTFOLIO:
Adhering to its name – Bluechip, the scheme is focused on bluechip companies with a little exposure to midcaps and absolutely no exposure to high risk small-cap counters. The fund's portfolio is thus a bundle of prominent large-cap stocks, such as Reliance Industries, Infosys Technologies, ACC, Hero Honda, Nestle and L&T among others.
The fund has been holding these stocks for more than three years now. Thus many of these holdings, acquired at fairly low valuations before the market rally of 2007, continue to yield handsome returns for the fund.
As far as the sectoral composition of the fund is concerned, being benchmarked to the Sensex, its sectoral weightages are similar to the former with large exposure in financials, energy and technology sectors.
Fortunately, for the scheme, a limited exposure to metals — despite this sector commanding a high weightage in the Sensex — has saved its day from meeting the same fate as that of the Sensex since January this year. Metals have been one of the most beaten out sectors this year.
On the other hand, had Franklin India Bluechip devoted a little more importance to the healthcare sector, its performance could have been even better. Its only investment in pharma sector is Dr Reddy's Lab.
And while the mutual fund industry, per se, has taken a pessimistic approach to the telecom space, Franklin India Bluechip seems to making value buy in this space and gradually increasing its exposure to two of the most sought after stocks in this space —Bharti Airtel and Idea Cellular.
Given their extremely low valuations at the current levels, if these stocks happen to see a turnaround in the near future, Franklin India Bluechip could be a big gainer.
OUR VIEW:
Given its past performance and a well crafted portfolio, Franklin India Bluechip is an ideal investment opportunity for conservative investors that shun undesirable risk embedded in the equity market and are content with just about average returns from their investments.
