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Smart Recovery

After a shaky start, the fund has performed consistently well over the past three years. Effective July 9, 2004, Franklin Indian Balanced will be merged with this fund thus enlarging FT India Balanced's total asset base

Here's a classic balanced fund with a conservative yet productive debt holdings that shield a deftly-run equity portfolio.

Launched in December 1999 when the great technology boom was nearing its end, the fund had a shaky start but it has successfully overcome its initial hiccups and has performed consistently well over the past three years. A broader sectoral allocation and swift equity moves have kept this fund in the hunt for top honours.

Heavy weightage to technology in the initial phase spelt disaster as the fund lost about a sixth of its value by the end of 2000. The losses continued till September 2001 despite a broader allocation owing to the bloodbath on the bourses. But it all turned around soon after as the market rallied post 9/11 and the fund outperformed the market gaining 16 per cent in a matter of a couple of months. The good performance was carried on in 2002. The fund ended the year as fourth best in the category with 18 per cent returns. This was made possible by the 17 per cent plus exposure to PSUs and lower (but still high quality) technology allocation. While the fund gained from the rally in PSU bank stocks, it protected itself from the volatility on the technology counters.

In 2003 the fund rode the broader market rally and outperformed the market but fell behind some of its more aggressive peers. It ended the year in the second quartile despite delivering a whopping 73 per cent return. It has always maintained a large-cap bias and a conservative bond portfolio in order to ensure stable returns but still it has been slightly more volatile than its peers due to its aggressive equity management style. However, it has compensated its investors for this volatility by delivering higher risk-adjusted returns. This year the secondary markets have gone through a bearish phase and this is reflected in the fund's year-to-date return of negative 6.43 per cent but this is still better than the category average of negative 9.1 per cent as on June 9, 2004.

On the debt front, there is a qualitative shift away from AA and AA+ papers. Also, there is heightened activity on the G-Sec front with frequent portfolio churning in order to stay away from the enhanced volatility in the G-Sec market.

All in all, this fund should be very appealing for investors who can stand some degree of volatility in order to perk up their returns.