Franklin India Smaller Companies Fund which has held onto four and five star ratings since 2013, it has outperformed its benchmark without a break for the last nine years. In terms of investing style, it manages a balance between businesses with an acceptable level of quality, growth and sustainability.
It invests in stocks with a market-cap below that of the 100th stock in the Nifty 500 Index. The fund usually holds 30 to 40 per cent of its portfolio in small-caps, 45 to 50 per cent in mid-caps and 10 to15 per cent in large-caps. The fund's approach is wholly bottom up. It looks for companies which can compound their earnings at a high rate, with good returns on capital, low capital intensity and capable management. To handle size, it has a leeway to invest 25 per cent of its corpus in large-caps.
Looking back at its return history, it has been a strong outperformer in undervalued markets, with a moderation during big bull phases. After a sub-par debut year in 2007, the fund navigated the big bull markets of 2012 and 2014 well, while containing losses below those of the benchmark in 2011. On a three and five year basis, it has outperformed its benchmark by 2 to 10 percentage points but has been neck and neck with the category.
In the last one year, a challenging period for active funds, it beat its benchmark but lagged behind the category. While this has been one of the few funds not to shut its gates to new inflows (its flexible mandate allows leeway to handle flows), its size has burgeoned to over Rs 7,280 crore by January 2018.
Franklin India Smaller Companies Fund is A quality-conscious small-cap fund.
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