Retaining quality

FUND PICK: Franklin Infotech

Background: Franklin Infotech was launched in August 1998. It has an entry load of 2.25 per cent and no exit load. The minimum investment should be Rs 5,000 with subsequent multiples of Rs 1,000. It offers both growth and dividend options.

Performance: The fund maintains a high-quality portfolio and charts its own course. Though sector funds carry high risk, Franklin Infotech has managed to deliver returns even in a volatile market like the first half of 2004.

As on August 6, 2004, it had lost 0.14 per cent since the beginning of 2004 against the category's decline of 4.63 per cent. Its three-year return is at 16.88 per cent while the category average is 20.17 per cent.

But over the long term, its returns improve. Its five-year return is at 9.81 per cent against the category's 6.91 per cent. Its return since launch stands at an impressive 27.2 per cent.

Portfolio: Franklin Infotech has a bias towards big companies, which has helped it through its tenure. The fund has largely focussed on select stocks and stayed with them for a long time. But the only cause for concern could be its concentration in Infosys, which accounts for 35 per cent of the portfolio.

When Infosys' stock fell in April 2003, it cost the fund a lot. In spite of the fall, the fund stuck to the stock and benefited when Infosys rallied in the second half.

Even in 2004, the share price of Infosys has not fallen much as compared to other large-cap peers. This has protected the fund from taking a bigger hit.

Sector funds are more volatile than other funds and Franklin Infotech has been the most volatile one in the category as the stock price of Infosys went up and down in the past 18 months. The fund holds around 10 per cent each in Wipro, e-Serve and Satyam.

Though the fund's large-cap domination has been rewarding in most times, it acted as a dampener in the 2003 rally, which was led by mid-caps.

The fund ended in the bottom half of the category that year. However, it has not fully ruled out mid-caps; stocks like e-Serve, MphasiS BFL and Bharat Electronics constitute a third of its portfolio. 
 

Top holdings
As on July 30, 2004	Value (Cr)	Net Assets (%)
Infosys Technologies	52.37	35.08
Wipro	15.42	10.33
E-Serve International	15.29	10.24
Satyam Computer Services	13.88	9.30
Hughes Software Systems	9.56	6.41
MphasiS BFL	8.60	5.76
HCL Technologies	5.46	3.66
Bharat Electronics	4.2	2.81
CMC	3.66	2.45
Infotech Enterprises	3.46	2.32
Datamatics Technologies	0.71	0.47
iGate Global Solutions	0.46	0.31
i-flex solutions	0.14	0.10
Danlaw Technologies	0.03	0.02
Planetasia.Com	0.03	0.02

Outlook: The fund is attractive for its high-quality portfolio. Though it may not be able to deliver smart gains over short periods, it has the potential to bring returns in the long run.

- Value Research