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Should I Sell Franklin India Prima?

I have invested in Franklin India Prima a year ago at Rs 17 in the dividend option. Should I sell now? Why is the fund not giving any dividend when its NAV is Rs 31?

I have invested in Franklin India Prima a year ago at Rs 17 in the dividend option. Should I sell now? Why is the fund not giving any dividend when its NAV is Rs 31?
Bhanu P

Let us answer your second question before we decide on the investment. Dividends are nothing but a way for the fund to distribute profits. And after each dividend payout, the NAV of the fund declines by the same amount. But if the fund does not declare dividend, that money doesn't disappear. Instead, it gets reflected in a higher NAV. Thus, non-declaration of dividend hardly makes a difference to any equity investor. The only advantage of a dividend from an equity fund is that it is tax-free.



The Dividend Payouts
Date  Dividend (%)
12-Nov-99 30
25-Sep-00 30
18-Jan-01 25
22-Mar-02 30
30-Jun-03 25


In case of Franklin India Prima, it has declared a dividend of 25 per cent in June 2003. And going by its historical frequency of dividend payouts, it usually declares dividend once a year. Thus, the next dividend from this fund should be expected next year. However, it's solely on the fund's discretion to declare dividend.

Now coming to your first question. Buying and selling decisions should be guided by your investment objective. If you think your target is met, sell it, otherwise stay invested. But, think twice before redeeming. Have you thought of what would you do with the redeemed money? But, if you look at Franklin India Prima's long-term performance—an annualised total return of 21 per cent in the past 10 years—staying with the fund would be a better option. And as you have been with this fund for only a year, staying with the fund for some more time would be ideal for you as equities fetch better return over a longer period of time. However, before making a call, evaluate your overall debt-equity allocation and act accordingly.

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