Franklin India Bluechip delivers superior returns without taking undue risk
An excellent pick for investors who want to beat the Sensex over the long term without taking undue risk. By and large, this fund delivers returns superior to the category average and occasionally astounds, catapulting it to the top slot.
Fund manager Anand Radhakrishnan does not follow the crowd or play the momentum game, and is relentlessly focused on long-term value. During the 2008 downturn, his cash exposure averaged just 5 per cent. So periods of relative under performance will come with the territory but are not a reflection of the fund's character.
In 2007, the fund's sector bets backfired as it stayed away from Metals, Power and Real Estate. "We are bottom up investors, so the sectoral exposures reflect our fundamental analysis over market cycles, rather than top-down views. In 2007, valuations along with ballooning subsidy burden made us uncomfortable about PSU oil companies. With regard to Power, valuations and policy uncertainty made us uncomfortable. We felt there was a bubble in Real Estate, with stocks trading at 2x-3x the net asset value. Many metal stocks were trading at high multiples to replacement costs," explains Radhakrishnan. The fund was over weight on Auto (which performed poorly that year) because of the fund manager's conviction regarding the consumption story and comfort with valuations.
During the 2008 crash, when his peers were piling up cash, he went bargain shopping to increase exposure to Financial Services. "India remains underserved in terms of Financial Services, but strong growth in personal incomes has led to increased demand. Given the low penetration of banking and financial services in India, companies in this sector have huge growth potential," says Radhakrishnan.
Last year, the fund's return of 84 per cent (category average: 73%), placed it in the third spot among the 46 funds in its category. It benefited from its exposure to Financial Services and high equity exposure when markets took a U-turn in March 2009. The 25 per cent exposure to mid caps (March 2009) also helped. "We invest primarily in large caps (market cap of the top 20% of CNX 500). Depending on our fundamental views, we might sometimes look at mid caps with a market capitalisation close to that of large-caps," says Radhakrishnan.
Have a medium to long-term perspective with this fund and you won't be disappointed.
