I am an existing investor in Franklin India Prima and would like to know whether to stay invested or exit. Is the decision by the fund house to close the fund for fresh investments good or bad for existing investors? I had invested in this fund about a year back with the intention of staying invested for about 5 to 7 years.
-Jyoti
There is no need to get worried. The decision of the fund house is in fact in the interest of its investors. This is because the fund has grown multifold in the recent times, and large size can be a cause of concern for a fund that invests primarily in mid- and small-cap stocks. Firstly, it can be quite a challenge to scout for more and more investment worthy mid-caps. Secondly, it will undesirable to keep investing more and more amounts of money in the same mid-cap stocks since they happen to be less liquid and more prone to stock market fluctuations. Therefore, the decision to suspend huge inflows in the fund for the time being looks a prudent one. However, it is only the lump sum investments that has been suspended from February 4, 2006 onwards and a SIP investor need not bother at the moment as he can continue to invest in the fund. Franklin India Prima continues to be one of the best mid-cap funds available and you can stay invested in the fund.
This article was originally published on March 13, 2006.
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