Adjudged first by Crisil in its rankings for quarter ended Sept.
Launched in December 1993 as a closed-ended fund, Franklin India Bluechip Fund (FIBF) is one of the oldest private sector funds in India. It was converted into an open-ended fund from January 1997. FIBF has been consistently ranked among the top 30 percentile of funds in the large-cap oriented equity category in the Crisil mutual fund ranking over the last 10 quarters. In the latest rankings for the quarter ended September, the fund was ranked Crisil fund rank one.
The fund has given superior returns over longer time frames thereby achieving its objective of capital appreciation over the medium to long term. While the assets under management (AUM) of equity oriented mutual funds fell by 9.3 per cent over the past one year, FIBF’s AUM increased by 18.4 per cent to Rs 4,025 crore, over the same period. The fund is managed jointly by Anand Radhakrishnan and Anand Vasudevan.
INVESTMENT STYLE
The fund predominantly invests in equity but has the liberty to invest up to 40 per cent in debt instruments and up to 15 per cent in money market securities. Within equities, the fund has maintained high exposure to large cap stocks. The fund has invested an average of 95 per cent in Crisil -defined large-cap stocks over the past two years.
PERFORMANCE
FIBF has delivered better returns compared to the category and its benchmark (BSE Sensex) across various time frames. Over a three-year period, it has given a compounded annual growth rate (CAGR) of 27 per cent, as against 20 per cent of the category and 19 per cent of the benchmark.
Over the last one year, the fund has limited the downside by giving lower negative returns vis-à-vis the benchmark and the category. One of the reasons for this is its lower equity exposure. As of September, the fund had 90 per cent exposure to equities, as against an average 93 per cent of the category.
Another reason is that the fund reduced exposure to underperforming sectors such as capital goods and oil which gave negative returns to the extent of 35 per cent and 21 per cent respectively as against negative 17 per cent of the benchmark. The fund also increased exposure to sectors such as auto and software, which gave relatively lower negative returns (12 per cent to 15 per cent) as compared to the benchmark.
The fund has also performed well during the 2008 market fall and the recovery phase after 2008. During the market fall from January, 2008 to March 2009, the fund gave lower annualised negative returns of 34 per cent (point to point) vis-a-vis 40 per cent by the benchmark. Further, the fund gave higher annualised returns than the benchmark in the subsequent recovery. From April, 2009 to November 29, 2011, it returned 21 per cent (point to point) vis-a-vis 14 per cent by the benchmark.
It has consistently delivered superior systematic investment plan (SIP) returns over the benchmark across the time frames. A monthly SIP of Rs 1,000 over the last 10 years would have returned a CAGR of 22 per cent. In rupee terms, the investment of Rs 1,20,000 (Rs 1,000 per month over 10 years) in FIBF would have grown to Rs 3,75,570. A similar investment in the benchmark would have grown to Rs 2,58,309.
PORTFOLIO ANALYSIS
The fund is more diversified, as compared to the category at both company and sector level. Over the past 1 year, the fund’s top 10 holdings constitute 47 per cent of its portfolio vis-a-vis 50 per cent for the category— the top 10 sectors constitute 71 per cent of its portfolio as against 72 per cent for the category.
The fund has held an average 44 stocks over the past one year. As against this, the category held an average 39 holdings over the same time period.
The fund has dynamically managed its exposure towards equities over the past three years. During the crisis of 2008, the fund maintained relatively higher exposure to equities as compared to the category. This helped the fund generate higher returns when the markets rebounded from April 2009 onwards. However, owing to the market volatility over the past one year, the fund’s exposure to equities has been relatively lower as compared to the category. Its equity exposure has reduced to an average 91 per cent for the quarter ended October 2011 from an average 95 per cent over the quarter ended January 2011.
Within equities, the fund has actively managed its sector exposures. During the global credit crisis in 2008, the fund increased its exposure to defensive sectors such as pharmaceuticals, consumer durables, consumer non-durables and healthcare to an average 12 per cent over October 2008 to March 2009. This was subsequently reduced to an average of five per cent in FY11. A similar approach has been adopted recently wherein the fund has reduced exposure to relatively underperforming sectors like capital goods and oil.
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