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A Fine Choice

Franklin India Taxshield may have developed a snag in its performance, but that should be overlooked, as its long-term record is compelling enough for it to be a core holding in a growth portfolio.

Franklin India Taxshield has proved that it is worth its salt in all weather since launch in 1999. This is not to say that this fund did not dwindle in falling markets but the loss was largely in line with the category and the benchmark S&P CNX 500. At the same time, during bull phases, it has outperformed its peers. In recent times though the fund has lagged its peers. That is because Franklin India Taxshield does not deviate from its stated investment philosophy irrespective of market conditions.

The fund believes in strong businesses having the ability to generate superior returns over the long term. While most of Franklin India Taxshield's peers moved to mid-cap stocks during 2002, this fund continues to stick to large-caps. Hence, the recent blemish in its relative performance should not worry investors much.

Franklin India Taxshield's launch in April 1999 preceded the peak of the technology-led market rally. On a tiny asset base, the fund fully capitalised on the boom. The handsome gains during that year turned out to be a big crowd-puller in 2000, which saw its unit capital swell 10 times. However, the fund maintained average 31 per cent in cash through 2000, and managed to end the year with marginal gains.

During 2001 and 2002, the technology sector moved in and out of favour, but the fund's portfolio attained diversity with reduced emphasis on the sector. Though tech still remains its top sector, almost 80 per cent of the portfolio is spread across large-cap growth stocks, mainly in auto, banking, healthcare and PSU sectors.

In fact, it was the second tax-planning fund to buy energy heavyweights HPCL and BPCL, much ahead of others in May 2000. And as PSU stocks hogged the show in the post-September 2001 rally, the fund was at the top of the heap.

However, as the PSU rally has fizzled out in the past few months, the fund's performance also suffered. Despite that, two PSU stocks continue to be among its top five picks (as on December 31, 2002), because more than the disinvestment trigger, the fund seems to be confident about the solidness of these businesses.

Franklin India Taxshield is a fund that is meant for keeps for its diversity and consistent investing style.