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Boring, But Effective

Franklin India Taxshield's large-cap bias might make it look dull, but it proves itself during downturns…

The distinct large-cap bias makes it look dull during market rallies, but it shines during the market downturns. Its ability to protect investors better than its peers during market busts has helped it build a competitive track record.

Strategy
The fund follows a bottom-up stock selection process and invests in stocks across the market capitalisation range.

Fund Insight
The fund has been biased towards large caps since launch. Exposure to small caps has never gone above 10 per cent. However, Radhakrishnan says that he does not look at market cap when investing and his only focus is on the stock, via bottom-up stock picking. He claims to be open to picking up mid- or small-cap ideas where he perceives favourable long term potential.
In market downturns, this one stands tall. In 2008, it was the third best performer amongst 29 funds all the while averaging just 5 per cent in cash. Increased exposure to FMCG and sticking to big names like Bharti Airtel and Infosys helped. However, during market rallies, it does not dominate. In 2007 and 2009, when BSE Metal delivered 121.47 per cent and 233.68 per cent respectively, the allocation to this sector never exceeded 5 per cent. In both these years, the fund underperformed the average by a margin of 3 per cent. This is typical of Radhakrishnan’s style. His investment decisions are driven mainly by individual company fundamentals and its growth drivers, alongside relative valuations. In 2007, valuations of metal stocks had run up sharply. In 2009, the liquidity-driven rally favoured momentum stocks which had witnessed sharp declines in 2008.

Portfolio Insight
Majority of the fund’s portfolio is held for long term. The fund typically adopts a buy-and-hold strategy in line with the medium- and long-term views on the company. However, short-term trades are done in response to changes in market conditions or valuations. For example, the moves in Tata Power and Voltas in 2010. The portfolio looks slightly concentrated when compared to its peers. However, the risk is mitigated with around three fourth of its assets in large caps spread over 46 stocks. Financial Services is the top sector (20%).

Risks
The fund sometimes takes concentrated sector bets, such as a 30 per cent exposure to Financial Services (September 2007). Such bets could impact fund performance if the sector fails to rally.