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Dependable quality, old world charm
Franklin India Prima Plus belongs to the old school of investing – steady and consistent in its performance. If you are the kind scouting for flashy returns, this fund would not have entered your radar.
Launched in 1994 and tested through several market ebbs and flows, Franklin India Prima Plus is a good addition to a long-term portfolio of 5-15 years for investors with medium risk appetite. Its 5-year annual return of 12.8% is a good 5 percentage points more than its benchmark CNX 500.
Suitability
Franklin India Prima Plus is predominantly a large-cap fund with a little bit of midcaps to help up the return potential. It is therefore suitable for less-aggressive investors. Its track record of containing declines reasonably well also points to the fund being a good fit for investors with moderate risk appetite.
Given the volatile market conditions, any investing in equities is best done through SIPs and Franklin India Prima Plus will be no exception to this rule. But if you have a time frame of not less than 10 years and do have the money to spare, then lump sum investing may be a good idea at this juncture, given that both earnings and economic factors are at perhaps at their respective low points.
Performance
Franklin India Prima Plus has managed to stay in the top quartile of the performance chart consistently. But the fund did not make it to the toppers' charts in recent years. Still, you'll probably find the fund in the top ten of the diversified fund category over 7- and 10-year periods.
The fund's ability to contain declines was well-demonstrated in 2008 as well as in 2011, if we take the recent years' performance.
In 2008, the fund's NAV fell 48% lesser than the 52% average fall seen in equity funds as well as broad indices. In 2011 too, it contained declines to just 16%; that was better than the category's fall of 24%.
The fund's ability to contain declines stems from two factors: one, its predominant exposure to large caps and two more important reason, its call on equities based on valuations. Now, this may sound strange, given that Franklin India seeks to invest in 'high growth' stocks that generate wealth.
High growth companies are defined by the fund as those that generate higher return on capital then their cost of capital. While stocks of high growth companies can also swing more with the markets, Franklin India Prima Plus has effectively contained this by taking good valuations calls.
The fund's exposure to equities is typically high when markets are beaten down – the end of 2008 and 2011 being cases in point. By buying when valuations are attractive, the fund's is in a better position to handle downsides from the highs (having bought stocks when they were low).
Similarly, valuation calls are taken when sectors become expensive. The 4% exposure to FMCG that the fund held a year ago has been eased over the course of the last one year, what with valuations steadily climbing northward for stocks in the space.
Portfolio
Franklin India Prima Plus has stocked its portfolio with growth sectors such as banks, telecom, auto and cement even as it holds IT and pharma.
Although pharma is perceived as a defensive space, the fund has picked high-growth stocks in the sector such as Dr Reddy's Laboratories and IPCA Laboratories and thus reaped rich benefits.
Fund manager Anand Radhakrishnan also appears to have plenty of conviction in some of his picks; holding as he does, the market-neglected blue chip stock Bharti Airtel as his second top holding.
Such calls do lend a shade of contrarian characteristic to this fund. With a low portfolio turnover of about a third, the fund certainly gives time for its stocks to perform.
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