To call Franklin India Bluechip Fund an all-weather fund would not be inaccurate considering it has maintained a winning record in both bull and bear markets. In eight of the last nine years, this fund has outperformed its benchmark, the BSE Sensex, and has managed to be in the top quartile of its category in six of these nine years.
Anticipating an IT rally much before others did in March 1998, the fund took heavy exposure in Infosys, Satyam and Digital Globalsoft. The IT sector accounted for 30-40 of Franklin India Bluechip's portfolio for the rest of the year. This helped the fund gain 31 per cent as against a 16.5 per cent loss registered by the Sensex. And at the peak of the IT rally in 1999, it wisely booked profits in some IT holdings and ended the year up 179 per cent.
Even during the market crash of 2000, the fund did better than the benchmark. There were two reasons for this. First, Franklin India Bluechip IT holdings were large-caps which were relatively less hurt. And, second, non-IT stocks like ITC, HDFC and Ranbaxy helped cushion the impact of a falling market. In 2001 too, when markets crashed, the fund nearly mirrored the index's returns. In September 2001 (post-9/11), it lost 16 per cent. But in the last quarter of 2001, the fund was able to make up for lost ground. This was partially due to the recovery made by some of its top IT holdings—such as HCL Technologies and Infosys—and partially due to cement and auto stocks like ACC and Hero Honda.
As we all know efficient equity investing requires buy low and sell high, and this is what Franklin India Bluechip has been able to do successfully. For instance, in 2001, when the price of HPCL fell, the fund increased its HPCL exposure helping it book profits during the pre-Budget rally of 2002. Later in the year, Franklin India Bluechip took positions in banking stocks such as SBI and ICICI Bank, which subsequently worked in its favour. At this time when mid-caps were performing the fund stuck to its investment universe of large-caps.
A solid performance track record combined with relatively low volatility makes this large-cap fund an ideal core holding. In all, Franklin India Bluechip deserves a place in every investor's equity fund portfolio.
This article was originally published on May 26, 2003.
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