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Franklin India Prima Fund: Better performing mid cap fund.
Fri, Apr 29, 2016
Source : Khyati Shah, Citrus Interactive

Franklin India Prima Fund is an open is an open-end mid-cap oriented equity diversified fund. The fund aims to provide long term capital appreciation as primary objective and income as secondary objective. The objective of the fund is to achieve a high degree of capital appreciation through investments in smaller and faster growing companies. The fund was launched in December 1993 and is benchmarked against the NIFTY 500 and Nifty Free Float Midcap 100. The fund has an AUM of Rs. 3,705 crores as on March 31, 2016 which has gone up by Rs. 275 crores as compared to last year March 31, 2015 (Rs. 3,430 crores).


Performance

The fund’s performance across different time horizons is extremely good as seen in the table given below. Since its inception the fund has given outstanding CAGR returns of 20.55 per cent.  Its performance since inception has done better that its benchmark by over seven percentage points in CAGR terms. In the time horizon of YTD, 6 Months, 1, 3 and 5 years it has clearly been in the top quartile of its peer-set. The outperformance margin vis-à-vis its benchmark as well as equity diversified category is substantially high.


YTD

6 Months

1 Year

3 Years

5 Years

Since Inception

Franklin India Prima Fund

-3.66

-0.61

-1.78

28.59

19.43

20.55

Nifty 500 Index

-4.05

-2.92

-7.54

13.23

6.87

---

Nifty Free Float Midcap 100

-4.81

-1.79

-1.91

19.8

9.65

13.31

Category Average

-5.16

-3.63

-5.85

19.77

11.92

NA

Rank

53/160

21/157

25/156

15/142

10/135

NA

Figures are in % as on March 31, 2016; Returns above 1-year in Compounded Annual Growth Rate


When we look at the calendar year returns it’s quite clear that this fund has beaten both of its benchmark in each of the last calendar five years.  It has also beaten the category average in each of the last calendar five years. The fund has been in top quartile of its peer-set in the years 2012, 2014 and 2015. In the year 2011 and 2013 it had been in the second quartile of its peer-set.


2011

2012

2013

2014

2015

Franklin India Prima Fund

-22.06

44.42

7.4

78.14

6.81

Nifty 500 Index

-27.19

31.84

3.61

37.82

-0.72

Nifty Free Float Midcap 100

-31

39.16

-5.1

55.91

6.46

Category Average

-23.89

34.17

5.39

54.03

3.67

Rank

44/133

23/138

52/142

19/145

39/153

All figures in % as on March 31, 2016

Risk: In terms of measures of risk such as standard deviation and beta (measured over last three years), the fund has taken lower risk compared to the category median.

 

Standard Deviation

Beta

Franklin India Prima Fund

0.82

0.65

Category Median

0.92

0.86


Risk adjusted Returns: In terms Treynor and Sharpe ratio (measured over last three years), the fund has provided higher risk-adjusted returns than the category median.

 

Treynor

Sharpe

Franklin India Prima Fund

0.07

0.05

Category Median

0.02

0.02

 

Portfolio Characteristics:

Sector concentration: The concentration of the fund in the top three, five and ten sectors is much lower than the category median.

 

Top 3

Top 5

Top 10

Franklin India Prima Fund

31.04

39.73

56.02

Category Median

37.63

50.87

71.34


Company concentration: The fund is diversified with concentration in top three, five and ten companies in its portfolio is much lower than the category median.

 

Top 3

Top 5

Top 10

Franklin India Prima Fund

15.14

20.69

33.53

Category Median

19.83

28.87

45.54

Sector & Company Concentration signifies that the funds maintain a fairly diversified portfolio.

Number of equity holdings: The fund currently holds 59 stocks in its portfolio (March 31, 2016), which is higher than the median stock count for the diversified-equity category, which currently stands at 45. Thus, based on equity count the fund runs a diversified portfolio compared to its peer set. Over the past five years the fund has always had a diversified portfolio with the number of equity holdings over this period averaging 55.

Thus, based on criteria such as equity count, sector concentration and company concentration, one can conclude that the funds maintain a highly diversified portfolio.

 

Cash allocation: Its cash allocation at the end of March 2016 was 7.11 per cent. The average cash allocation for last five years is 7.37 per cent. Its maximum allocation to cash over last two years was 9.58 per cent in February 2015 and lowest was 4.02 per cent in January 2016. In 2015 it had an average cash allocation of 7.83 per cent. Thus on the whole the fund maintains higher percentage of allocation to cash.

 

Portfolio Characteristics: The top 5 sectors in the portfolio had an allocation of 39.73%% which is lower than the category average of. 49.60%. The top 5 sector include Bank - Private, Pharmaceuticals & Drugs, Bearings, IT – Software and Finance – Housing.

The fund’s exposure to cyclical stocks currently is 73% followed by Services with 10% and Defensives with 6%. The Top five holdings are Yes Bank Ltd., Finolex Cables Ltd., FAG Bearings India Ltd., IndusInd Bank Ltd. and HDFC Bank Ltd.

In the last six months the fund has bought stocks of Crompton Greaves Consumer Electricals Ltd. and Vardhman Textiles Ltd. and The Federal Bank Ltd whereas stocks of CRISIL Ltd. and ACC Ltd. have been dropped from the portfolio. Alkem Laboratories Ltd. was bought in December 2015 and then dropped in the next month.

The current allocation to mid-cap is 47% and large cap allocation is 43%.

 

Processes

Atleast 60% of the funds will be invested in equities, upto 40% would be invested in Debt and upto 15% in Money Market instruments. The fund managers are following an active investment strategy taking defensive/aggressive postures depending on opportunities available at various points in time. The fund manager would invest in dynamic and well-managed, small and medium sized enterprises which usually experience higher growth rates than their well-established larger counterparts. If identified early, investments is such companies have the potential to deliver substantial capital appreciation as they transition into becoming tomorrow’s well established large size companies. Such companies have the advantages of nimbleness and entrepreneurial culture that can lead to long term growth.

The fund’s expense ratio is 2.26 per cent which is slightly lower than the category average of 2.32 per cent. Like most equity funds the fund has an exit load of 1 per cent on or before one year from the date of investment. Minimum investment required for the fund is Rs. 5,000.


Fund Manager

Franklin India Prima Fund is managed by are two fund managers: R Janakiraman and Roshi Jain.

Mr. R. Janakiraman is vice president, portfolio management equity for Franklin Templeton India AMC Ltd. He has over 16 years of experience in research field and is responsible for providing Equity research support.Mr. R. Janakiraman holds an M.B.A. from the Indian Institute of Management in Bangalore and a bachelor of engineering from the Government College of Technology in Coimbatore. He is a Chartered Financial Analyst (CFA) charterholder. He manages several other funds such as Franklin India Flexi Cap, Franklin India Prima Plus Fund, Franklin India Smaller Companies Fund, Franklin India High Growth Companies Fund, & Franklin India Opportunities Fund. These funds have a good track record which speaks positively about the fund manager’s skills. Prior to joining Franklin Templeton, he has also worked with Indian Syntans Invt Pvt. Ltd., Citicorp Information Tech Ltd., and UTI Securities Exchange Ltd.

Ms. Roshi Jain is the Vice-President & Portfolio Manager - Equity. Ms. Jain is a CFA, ACA and PGDM from IIM-Ahmedabad. Ms. Jain has been a research analyst at Franklin Templeton responsible for providing research support on the Indian capital goods and infrastructure sectors for 9 years. Ms. Jain has been in the investment Industry for the past 13 years. Prior to joining Franklin Templeton, she worked as a Financial Analyst at Goldman Sachs, London. She is also fund manager for Franklin Asian Equity Fund, Franklin Build India Fund, FT India Feeder - Franklin US Opportunities Fund, Franklin India Flexi Cap Fund, Franklin India Prima Fund & Franklin India Smaller Companies Fund.

 

View

Franklin India Prima Fund has delivered over 23 years of strong and consistent performance. It has shown remarkable consistency in figuring as a top quartile fund in most time periods. It has the potential to deliver high capital appreciation over time. A strong fund management team well diversified portfolio, low expense ratio and low turnover in the portfolio positions it favourably as a choice for the midcap allocation in your portfolio.

 

To read the previous Citrus Analysis of Franklin India Prima Fund Click Here

 
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