There are no half measures with Franklin India Prima. This fund can either be located in the first quartile of its category or the last. At present, its first quartile status is being maintained with a 132.23 per cent one-year return.
But this should not be the only reason to invest here. Franklin India Prima, apart from being the longest-serving mid-cap fund, has a track record of solid performance and raises the bar for new entrants in the category.
Though mid-caps by their very nature are volatile, this fund's returns have more than made up for volatility. An awesome five-year annualised return of 40.85 per cent has been the reward for investors who have been able to sit out the fund's volatility. This fund also has the highest risk-adjusted returns. In spite of slowing down in the third quarter, the fund is all set to end the year 2003 at the top of the heap.
The fund manager looks for companies with rapid growth potential and the ability to become market leaders. Since mid-cap stocks are relatively illiquid, Franklin India Prima takes a small exposure in a large number of companies. This fund holds on to stocks for long and has benefited from this buy-and-hold strategy. For instance, it held Goodlass Nerolac since June 2002 and doubled its exposure in January 2003 at a slightly higher price. Goodlass has gained a whopping 115 per cent since the start of this calendar. LIC Housing Finance is a similar example.
Thus, the fund has done well in the past two years as mid-caps have done well. It is among the top gainers among all the equity funds. Financial services, chemicals, engineering and lately auto stocks have been this fund's favourite hunting grounds. At the same time, it is relinquishing exposure to technology, healthcare and FMCG sectors.
The problem with mid-cap investing is that they can fall faster than large caps when the market loses interest. Year 2000 was one such year in the last five years when Franklin India Prima ended up in the last quartile as mid-cap stocks, especially in the technology sector, got pummeled.
Investors looking for an exposure to mid-cap stocks will find this fund to their liking. A limited exposure should boost returns for an equity fund portfolio dominated by large-cap funds.
This article was originally published on December 31, 2003.
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