<b>Fund Pick:</b> Franklin India Smaller Companies Fund

Small in market capital, high on returns

Launched in January 2006, Franklin India Smaller Companies Fund is classified under the small & mid-cap category of CRISIL Mutual Fund Ranking. It has been ranked in the top 30 percentile (CRISIL Fund Rank 1 or 2) over the past four consecutive quarters as of September 2016. Jointly managed by R Janakiraman and Hari Shyamsunder, the fund's quarterly average asset under management (AUM) stood at Rs 3,579 crore as on September 2016.

The fund aims to provide investors with long-term capital appreciation by investing in small and mid-cap companies, with 75 per cent of the corpus directed to companies whose market capitalisation falls below the 100th stock in Nifty 500 Index.

Franklin India Smaller Companies Fund has constantly outperformed the category (funds ranked under the small & mid-cap category in September 2016 CRISIL Mutual Fund Ranking) and the benchmark - Nifty Free Float Midcap 100 - across all time frames under analysis. The fund posted impressive trailing three-year annualised returns of 33.70 per cent, outstripping the category's 29.53 per cent and the benchmark's 23.43 per cent. 

The fund managed to generate positive returns of 2.68 per cent during the European crisis (January 2011 to June 2013) when the category and the benchmark delivered negative returns. It displayed remarkable performance after the European crisis (July 2013 to February 2015), achieving 67.05 per cent annual returns compared with the category's 61.72 per cent and the benchmark’s 41.51 per cent.

An investment of Rs 1,000 in the fund on January 13, 2006 (inception of the fund) would have grown more than four times to Rs 4,470 on December 7, 2016, at an annualised rate of 14.72 per cent. A similar investment in the benchmark would have grown to around Rs 3,471 (12.09 per cent).

Similarly, Rs 1,000 invested per month in the fund over the past 10 years via systematic investment plan (SIP), totalling Rs 1.2 lakh, would have grown to Rs 3,65,159 by December 7, 2016, at 21.31 per cent annualised returns. In comparison, a similar amount invested in the benchmark would have returned Rs 2,34,889 at 13.03 per cent.

In October 2016, the fund had a well-diversified portfolio, with equity exposure to 74 stocks across 25 sectors. The top 10 stocks formed 27.42 per cent of the fund’s equity portfolio.

Over the past three years ended October 2016, the top five sectors, on average, constituted 48.53 per cent of the portfolio. Over this period, the industrial products sector, on average, had the highest exposure of 18.28 per cent followed by banks (13.05 per cent), software (6.14 per cent), media & entertainment (5.21 per cent) and finance (4.62 per cent).

The fund has consistently held 28 stocks for the past three years, from its investment universe of 98 stocks. Top holdings among the consistently held stocks include Finolex Cables, YES Bank, Repco Home Finance, Amara Raja Batteries and eClerx Services.