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Franklin India Taxshield

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PURELY in terms of returns, Franklin India Taxshield is not the category topper if one were to look at a three-year tenure, the minimum lock in period for a tax-savings fund or equity-linked saving scheme (ELSS). But, this fund is known to be a steady horse with above-average returns. It has a clear largecap bias, which would explain why it has outperformed the category in 2011, a dull year for the equity market. But, if the market were to rally, this fund would have just been an average performer. At the same time, you can trust it to protect your wealth much better than most of its peers if the market were to crash.

The fund's objective is to achieve long-term capital growth by investing between 80-100 per cent of assets in equities with limited exposure to PSU bonds, debentures and money market instruments, while offering income tax rebate to investors. At the moment, 91 per cent of its assets is in equities and around 8 per cent in cash. Launched in April 1999, the scheme today has about Rs 790 crore in assets under man agement (AUM).

Managed by Anand Radhakrishnan and Anil Prabhudas, the fund bets heavily on financials, energy, technology, communication and automobile stocks, a clear case of clear case of momentum investing. In the process, it does become too concen trated on specific sectors at times. For instance, its exposure to the financial services sector had gone up to 30 per cent in September 2007.
This can be a risky situation.

At the moment, the fund has the highest concentration of 16.6 per cent invested in financials, 14.66 per cent in energy, 13.33 per cent in technology and 10.64 per cent in communication. Even then, around 45 per cent of the portfolio is exposed to the top three sectors.

Some of the top stocks in the portfolio include Infosys, Bharti Airtel, ICICI Bank, Grasim Industries, HDFC Bank, Reliance Industries, Kotak Mahindra Bank, Idea Cellular, Crisil, Bosch, Gujarat Mineral Development Corporation (GMDC), Power Grid, IndusInd Bank, Cummins India and Marico, among others. Most of these stocks have been in the portfolio for long, which suggests a bottom-up and buy-and-hold style of fund management. The fund keeps the share of small-cap stocks in single digit.

At present, the fund has a portfolio of 24 stocks, out of which, the top five have about 29 per cent allocation, top 10 have 43 per cent, while the bottom 10 stocks have an allocation of less than 2 per cent each. 
 
 

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