Franklin Infotech is a great believer in big companies. Unlike others, it charts its own course, which is widely evident from its recent performance. Mid-way through 2004, the fund is the least affected of all - down just 6.18 per cent - nearly 4 per cent less than the category average. The fund has achieved this by largely focussing on select stocks and staying with them for long.
The only cause of concern could be the fund's concentration in Infosys, which account for one-third of the portfolio. Such high exposure to a single stock cost the fund dear in the first half of 2003, when Infosys share price crashed. But, as the fund stuck to the stock, it gained the most in the later half of 2003 when Infosys revised its revenue guidance upwards. Even this year (in 2004), the share price of Infosys has not fallen much as compared to other large-cap peers, hence protecting the fund from taking a bigger hit. Thus, Infosys being a large-cap leader, a higher concentration here should hardly be considered a risk.
But, as the share price of Infosys has moved up and down very sharply in the past one-and-a-half years, this has made Franklin Infotech the most volatile fund in the category. An over-concentrated portfolio spread over just 15-18 stocks further adds to the fund's volatility. The fund's other top holdings have been E-Serve International, Wipro and Satyam, which also finds a large place in the portfolio, together accounting for 30 per cent of the fund's total assets.
Though Franklin Infotech's large-cap domination is rewarding in recent times, it acted as a dampener in the rally of 2003. Since, the rally was led by mid-caps, Franklin Infotech ended the year 2003 on the bottom half of the category. However, the fund has not fully ruled out mid-caps. It has some good mid-cap tech stocks like E-Serve, Mphasis BFL and Bharat Electronics in its kitty. In fact, E-Serve has gained 18 per cent this year and the fund holds over 10 per cent in it. Overall, mid-caps account for one-third of the portfolio.
Franklin Infotech holds charm for its high quality portfolio. Though the fund may not be able to deliver smart gains over the short-run, but over long-run Franklin Infotech could be a handy tech fund to hold on to. For technology investors who favour large-cap names, this fund is clearly a first choice.