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The economic indicators are improving and stock prices have run up with them. But here’s a fund, which can help you identify high-growth companies even in this scenario and shield you from volatility.
Franklin India High Growth Companies Fund seeks to invest in good quality companies which have potential to grow faster than the economy and yet remain sturdy during corrective phases. The fund’s flexibility to switch allocation across market cap curves can also shield your portfolio during such turbulent times.
The fund has invested about 60 per cent of its total assets in large-cap stocks; this can help it tackle market falls better than its benchmark — CNX 500 Index. Investors with a high risk appetite and a three- to five-year horizon can invest a portion of their surplus in this fund.
Steady outperformance Despite its large-cap skew, the fund has outperformed its benchmark CNX 500 Index by a significant margin across one-, three- and five-year time frames. Franklin India High Growth Companies Fund scores high on consistency too.
Over the last five years, the fund has been successful in outpacing its benchmark returns almost 80 per cent of the time.
The fund not only outperformed the CNX 500 Index during rally phases but also managed to contain downsides during market falls. For instance, between January and August 2013, the fund’s NAV declined 14 per cent, lower than the 16 per cent fall for the CNX 500 Index.
Its strategy to take refuge in defensive themes such as IT and pharma helped it fare better than its benchmark. The fund managers’ decision to raise cash levels during such volatile phases also aided performance.
A systematic monthly investment in Franklin India High Growth Companies Fund over the last five years would have yielded annual returns of almost 26 per cent.
The fund has increased its holding in stocks in the cyclical sectors such as financials, industrial products and capital goods in the last six months. Even as it pruned exposure to IT and pharma, it has been a buyer in FMCG stocks since April this year. Also, the fund’s cash holding, as of September, was at 6.2 per cent of total assets, higher than the 3 per cent level at the end of May 2014.
The fund held 39 stocks in its portfolio as of September, making it rather compact. ICICI Bank (5.6 per cent) and Axis Bank (5.2 per cent) were the top holdings.
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