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Fund Manager: Anand Radhakrishnan
Process: The fund manager uses a large-cap model portfolio as his base and constructs his investment portfolio around it.
Performance: On Radhakrishnan's watch (April 2007 to November 2017), the fund (up 13%) has beaten its benchmark, the Sensex (up 9%) as well as 75% of
Franklin India Bluechip Fund is a true-blue large-cap fund.
Anand Radhakrishnan's portfolio displays strong convictions and deviates significantly from the benchmark index and category peers both in terms of stock picks and sector weights. For instance, as of October 2017, Radhakrishnan is underweight the consumer staples sector (7%) vis-à-vis the benchmark index (10%) given the sector's rich valuations. Instead, he prefers stocks in the healthcare sector as he believes they have reasonable growth prospects, generate steady cash flows, and trade at cheaper valuations. Radhakrishnan prefers private-sector entities over their public-sector counterparts, in line with his belief that the former offer more robust business models and superior operational efficiencies. For instance, private-sector banks such as HDFC Bank and ICICI typically feature as core holdings.
Hence, the portfolio's core exposure continues to be in the private banks and consumption-oriented stocks. In the recent times, the manager has shifted his focus on stocks which stand to benefit from the pickup in urban consumption than rural consumption. Radhakrishnan will back his convictions, but isn't stubborn. Hence, in the wake of increasing competition in the telecom space he didn't hesitate to trim exposure in one of his top and long-held holdings, Bharti Airtel, in the past. The cash exposure rarely accounts for more than 10% of assets. The fund manager is fairly valuation-conscious and sells/underweights stocks he believes are fully valued.
This has helped the fund fare competitively versus peers in market downturns. Also, he does not shy away from taking big long-term contrarian bets if he believes the issue has good growth prospects but he may face near-term headwinds. His overweight positions in the telecom sector vis-à-vis peers this year and exposure to cement stocks in 2013 are examples of this approach. Radhakrishnan trades roughly 5%-10% of the portfolio. These tend to be established names whose price points he understands well. The fund tends to perform well in market corrections, given his emphasis on quality and valuations.
The years 2008 and 2011 are a case in point, as despite lower cash allocation, his skilled stock selection helped the fund outscore most of the competition. The fund closed 2009 and 2010 in the top quartile, thanks to some smart investments in financials (private-sector banks) and technology stocks in 2009, and consumer staples and technology sectors in 2010. Radhakrishnan's top picks, such as Bharti Airtel and Infosys Tech, were the main detractors from the fund's performance in 2012, which was a down year.
While Radhakrishnan's contrarian picks from the metal and mining sector fared poorly in 2013, relatively lower small/mid-cap exposure dragged its performance down vis-à-vis peers in 2014. The fund had a good run in 2015 and 2016 as it outperformed 73% and 79% of category peers, respectively. However, the fund has struggled this year (until November 2017) as the manager's exposure in areas where cash payment is the primary source of transaction was severely affected after demonetisation last year. Also, exposure to the healthcare sector (particularly Dr. Reddy, Lupin, and Sun Pharma) dragged its performance down.
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