BHAVANA ACHARYA | Jan 4, 2014 | Hindu Business Line

Franklin India Prima Plus, in the past one year, is up around 2 per cent. That’s better than the flat returns logged by its benchmark CNX 500.

The fund also makes only the mid-quartile category of diversified large-cap equity funds in the one-year period. It, however, does not frequently switch sectors and stocks and bases calls on valuations.

 

A strategy of this nature tends to deliver well over the longer term and indeed, Franklin India Prima Plus has delivered well over the past nearly 20 years.

The fund, which has a long history, has seen out many a market cycle well. Its 10-year annual return of 19 per cent beats the approximately 13 per cent delivered by the Nifty, Sensex and CNX 500. It’s also among the best performers in this period.

Strategy and suitability

The fund invests in large-cap stocks (which hold lower risk) with some mid- and small-caps added to pep up returns. Its latest portfolio, for example, has a 19 per cent share of stocks with capitalisation of less than Rs 7,000 crore.

Calls are made based on valuations. The fund has also maintained equity investments above 90 per cent, even during bear markets. This allows it to make the most of subsequent market upswings.

Investors with a moderate risk appetite can invest in the fund. Investors should also be willing to hold the fund for a period of five years or more. The systematic investment route can be used.

Thanks to its buy-and-hold and valuations-based strategy, the fund has seen temporary blips in performance from time to time — in early 2010, mid-2008 and late 2007, for instance. But performance evens out over the long term. On an annual rolling return basis, the fund has done better than the CNX 500 index a good 86 per cent of the time in the past ten years.

Over the one-, three- and five-year periods, Prima Plus has beaten the CNX 500 by two to five percentage points. Even comparing its returns with the narrower BSE 100 – given the fund’s large-cap bias – the fund has done well over the longer term.

The fund is also good at containing downsides. During both the previous market downswings of 2008 and 2011, for example, it lost eight to ten percentage points lesser than its benchmark.

Portfolio

The banking sector has been the top holding in the portfolio for several years, only briefly ceding top spot to sectors, such as FMCG, software, telecom and capital goods.

Calls in this space, apart from the tried-and-trusted ICICI Bank and HDFC Bank, include more offbeat ones, such as Federal Bank, IndusInd Bank and Kotak Mahindra Bank.

With the fund’s tendency towards value picks, holdings in over-heated sectors, such as FMCG have been cut gradually over the past year. It added to software significantly in 2011 and 2013. Holdings in sectors, such as automobiles and pharma, have also been steady over the past few years.

The fund also has a fair share of stocks in sectors such as mining and cement which have been beaten down of late, and could turn around.

(This article was published on January 4, 2014)

Source : http://goo.gl/C8qf1z