Mutual Funds

Franklin India Prima Fund: Playing it relatively safe

K Venkatasubramanian | Updated on July 01, 2018 Published on June 30, 2018

Investors can use the steady, mid-cap scheme as a diversifier within their portfolios

Among the relatively safer and steadier schemes in the mid-cap space, Franklin India Prima is a quality name you can consider investing in with a time horizon of at least five years.

The fund is in its 25th year and has delivered extremely well since its inception — over 20 per cent returns annually.

It reduces risks by taking diffused exposure to individual stocks and sectors, and by taking cash calls.

The fund also adds some large-caps to its portfolio to tone down the risk profile, though the proportion is kept to less than 15 per cent, most of the times.

By investing in a combination of value and momentum stocks, it has delivered above-average returns over the long term.

Within the mid-cap space, the fund has always placed bets on dependable and high-quality names.

Franklin India Prima may not be the best, but it usually beats the category average and stays in the top-to-mid rankings of mid-cap funds.

Over three-, five- and 10-year time-frames, the scheme has convincingly outperformed its benchmark, Nifty 500.

The level of outperformance over 5-10-year horizons has been 8-9 percentage points.

In the past 10 years, the fund has delivered compounded annual returns of 18.2 per cent, higher than what peers such as SBI Magnum Midcap, ICICI Pru Midcap and Aditya Birla SL Midcap have recorded.

Investors can use the scheme as a diversifier within their portfolios.

The SIP (systematic investment plan) route can be taken to average costs and ride out market volatility.

Portfolio and strategy

Franklin India Prima tends to play it safe with its picks.

Exposure to individual stocks is generally restricted to 3-4 per cent even for top holdings.

The fund maintains a large portfolio of 50-60 stocks, with diffused exposure to individual names.

The fund has ensured adequate participation during market rallies and has managed to contain downsides quite well.

The scheme also keeps 7-9 per cent of its portfolio in cash and debt during volatile markets.

Franklin Prima has maximum holding in banking and finance stocks, but exposure is mostly restricted to high-quality names such as HDFC Bank, Kotak Mahindra Bank, Equitas Holdings and City Union Bank. Over the past year, the fund has increased its exposure to auto ancillary and industrial products — two sectors that are expected to do well as the economy moves towards a high-growth trajectory.

Increased exposure to the consumer non-durables sector over the past couple of years has enabled the fund to benefit from the sprint in the prices of the stocks in the segment.

Weightage to the software sector has been reduced over the past one year, resulting in the fund losing out on the rally in the space.

Over the long term, Franklin Prima may be expected to deliver category-beating returns with relatively low level of risks.

SEBI’s categorisation

Given SEBI’s rigid minimum investment requirement for mid-cap funds (at least 65 per cent in mid-caps) there could be some changes in the portfolio.

The benchmark has been changed to Nifty Midcap 150.

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