Franklin India Prima Plus To Be Renamed Franklin India Equity Fund - Fund Review - Outside View by PersonalFN

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Franklin India Prima Plus To Be Renamed Franklin India Equity Fund - Fund Review
May 28, 2018

Franklin India Prima Plus is one of the flagship schemes of Franklin Templeton Mutual Fund. Launched over two decades ago, this large-cap biased fund has attained a corpus of over Rs 10,000 crore. Now that SEBI has issued norms for mutual fund scheme categorization, the fund house had to make changes in the scheme to comply with the regulations.

Since, Franklin India Prima Plus predominantly invests in large-cap stocks with an opportunistic allocation to mid-caps (15%-20%), the fund house had an option to categorise the equity mutual fund under one of the following categories - Large Cap Fund, Multi Cap Fund or a Large & Mid Cap Fund.

Franklin India Bluechip Fund already held the Large Cap category, therefore, this option was ruled out. The Large & Mid Cap Fund category requires a minimum investment of 35% to mid-cap stocks, hence, the Franklin India Prima Plus fund's investment strategy would be altered.

Thus, the nature of Franklin India Prima Plus was best suited as a Multi Cap Fund. Under this category, the mutual fund scheme can invest across large cap, mid cap and multi cap stocks. There is no minimum investment required towards any market cap. The scheme name and category changes will come into effect from June 4, 2018.

For the entire list of scheme names changes, do read: Your Mutual Fund Scheme Renamed. What Should You Do?

Given this mandate, Franklin India Prima Plus can remain predominantly invested in large-cap stocks and continue to take tactical allocations to mid-caps, as and when required. While the scheme has not spelled this out in its Investment Strategy published in the Addendum, it is likely to stick to its existing investment approach. Hence, investors should not be worried with the change in scheme name.

In terms of performance, Franklin India Prima Plus has not disappointed. It is among the top ranking schemes in the category based on its past returns. No wonder, the scheme is among the few equity funds that have garnered a corpus above Rs 10,000 crore. However, over the recent few years, the large-cap oriented fund has found it difficult to outperform its broader benchmark - the Nifty 500 index.

In this brief analysis, we take a close look at the features and performance of Franklin India Prima Plus.

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Investment Objective of Franklin India Prima Plus (Franklin India Equity Fund)

Franklin India Prima Plus has an investment objective to "to provide growth of capital plus regular dividend through a diversified portfolio of equities, fixed income securities and money market instruments."

The new fund, Franklin India Equity Fund will follow the same investment objective.

Franklin India Prima Plus Details

Fund Facts
Category Diversified Style Blend
Type Open ended Market Cap Bias Multi-cap
Launch Date 29-Sep-94 SI Return (CAGR) 18.72%
Corpus (Cr) Rs 11,848 Min./Add. Inv. Rs 5,000 / Rs 1,000
Expense Ratio (Dir/Reg) 1.29% / 2.24% Exit Load 1%
Portfolio Data as on April 30, 2018.
SI Return as on May 16, 2018.
(Source: ACE MF)

Under normal circumstances, Franklin India Prima Plus allocates...

  • 40% - 100% to equity and equity related securities
  • 0% - 40% to debt instruments
  • 0% - 20% to money market instrument

From June 4, 2018, the new scheme Franklin India Equity Fund will allocate -

  • 65% - 100% to equity and equity related securities
  • 0% - 35% to debt and money market instruments

Growth Of Rs 10,000, If Invested In Franklin India Prima Plus 5 Years Ago

Had you invested Rs 10,000 Franklin India Prima Plus, five years back on May 16, 2013, it would have grown to Rs 22,938 as on May 16, 2018. This translates in to a compounded annualised growth rate of 18.05%. In comparison, a simultaneous investment of Rs 10,000 in its current benchmark - Nifty 500 - TRI would now be worth Rs 20,471 (a CAGR of 15.40%). In the past five years, Franklin India Prima Plus has consistently been able to maintain a good margin over the benchmark. Bulk of the outperformance came in the 2014-15 period of the past five years. Over the years, the large-cap oriented scheme has managed to maintain the margin of outperformance, despite the high volatile period 2015-16.

Franklin India Prima Plus: Year-on-Year Performance

Franklin India Prima Plus has a track record of 24 years. The year-on-year performance of the fund vis-a-vis its benchmark - Nifty 500 - TRI has been quite impressive. However, there have been a few periods where the scheme has faltered. After outperforming the benchmark by more than 15 percentage points in 2014, and another 5 percentage points in 2015, the fund has struggled in the 2016 and 2017 yearly periods. In 2016, Franklin India Prima Plus marginally trailed the benchmark, while in 2017, it lagged the benchmark by about 7 percentage points. The fund has continued to struggle in 2018 as well. However, the issue here is the choice of benchmark.

In 2016 & 2017, mid-caps dominated the market rally. Some of these stocks are present in the Nifty 500 - TRI. However, Franklin India Prima Plus, maintained a lower exposure to mid-caps, probably because of its mandate and the high valuation of mid caps, which didn't portray a long term opportunity. The fund managers, preferred to maintain the stability of the portfolio and keep the risk low.

Franklin India Prima Plus: Performance Vis-a-vis Category Peers

Rolling Period Returns
Scheme Name Corpus (Rs Cr) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) Std Dev Sharpe
Kotak Select Focus Fund 19,228 22.87 19.65 15.96 21.52 12.95 0.15
Axis Focused 25 Fund 3,714 28.22 20.45 15.66 17.98 14.45 0.19
JM Core 11 Fund 35 26.63 24.60 15.52 19.28 18.45 0.13
SBI Large & Midcap Fund 2,319 21.66 16.41 14.59 20.45 14.05 0.11
IDFC Classic Equity Fund 2,889 24.54 20.54 14.45 16.41 13.71 0.13
Invesco India Growth Opp Fund 484 25.59 17.64 13.83 19.11 12.85 0.15
SBI BlueChip Fund 19,088 17.98 15.41 13.69 19.24 11.75 0.12
Franklin India Prima Plus Fund 11,848 17.54 14.49 13.38 19.48 11.83 0.09
Motilal Oswal Focused 25 Fund 1,080 21.57 15.60 13.34 16.61 13.33 0.08
IDFC Focused Equity Fund 1,561 35.82 21.64 12.56 15.07 14.12 0.13
Reliance Large Cap Fund 9,833 24.15 16.93 12.43 18.46 13.96 0.09
DSPBR Focus Fund 2,961 16.90 14.41 12.33 17.28 13.87 0.07
Aditya Birla SL Frontline Equity Fund 20,451 19.03 16.26 12.09 18.35 12.54 0.09
Indiabulls Blue Chip Fund 395 20.78 16.59 12.01 14.20 14.33 0.13
HDFC Growth Fund 1,181 22.76 18.42 11.93 15.16 14.35 0.11
ICICI Pru Focused Bluechip Equity Fund 17,142 21.39 17.25 11.86 17.44 12.24 0.11
Aditya Birla SL Top 100 Fund 4,212 19.30 16.12 11.81 18.60 12.58 0.09
Kotak Classic Equity Scheme 334 23.51 17.36 11.35 16.03 12.72 0.12
Invesco India Largecap Fund 142 18.06 13.86 11.23 16.32 11.79 0.09
Reliance Vision Fund 3,378 23.66 16.22 11.21 17.31 14.65 0.02
NIFTY 500 - TRI   23.53 18.00 12.06 16.53 13.76 0.12
Returns are on a rolling basis and those depicted over 1-Yr are compounded annualised.
Data as on May 16, 2018
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

Franklin India Prima Plus has maintained a decent lead over the benchmark in the 3-year and 5-year periods. In fact, in the 3-year periods, it is among the top performing large-caps oriented funds. In the 1-year and 2-year periods, the performance of the scheme has faltered.

In the 1-year period, while most of the funds generated a return in excess of 20%, Franklin India Prima Plus generated a return of around 17%. Again in the 2-year periods, the return of the fund was around 14%, while most other schemes generated a return of two percentage points higher. Not to mention, the scheme underperformed the benchmark in these periods.

However, what many may miss is that, though the returns have been lower, so has been the risk or volatility of the scheme. The standard deviation of the fund, a measure for volatility, is among the lowest. The fund management of Franklin India Prima Plus have taken adequate measures to protect the fund from unnecessary risk. In the bargain, it had to forego some amount of returns.

The top five large cap oriented mutual funds in the 3-year rolling period performance include-Kotak Select Focus Fund, Axis Focused 25 Fund, JM Core 11 Fund, SBI Large & Midcap Fund and IDFC Classic Equity Fund.

Investment Strategy of Franklin India Prima Plus (Franklin India Equity Fund)

Franklin India Prima Plus remains fully invested and, on an average, maintains an allocation of over 90% to equities. The fund follows a blend of value and growth style of investing. It sticks to a bottom-up approach to stock-picking and chooses wealth creating companies run by quality management, across sectors.

Franklin India Prima Plus invests in a diversified portfolio of primarily large caps, with a marginal exposure to small and midcaps. The fund keeps a long term view of the market and sticks to a buy and hold strategy. The core portfolio of the fund, made up of large-cap holdings, is rarely churned.

Franklin India Prima Plus - Portfolio Allocation and Market Capitalisation Trends

Over the past year, the total equity exposure to equity has averaged around 95%. The equity exposure dropped to 93% in October 2017 and gradually increased to 96% in February 2018. As on April 30 2018, the equity weightage stands at 95%. The fund maintains the large-cap exposure above 75%, to a maximum of 80%. The mid-cap exposure has been held above 15%, and has increased to a maximum of just 19% in the past 12 months. As on April 30, 2018, Franklin India Prima Plus held an exposure of 79% to large-caps and 16% to mid-caps.

Franklin India Prima Plus - Top Portfolio Holdings
Top 10 Stocks
Stocks % of Assets
HDFC Bank Ltd. 8.70
Infosys Ltd. 5.16
Bharti Airtel Ltd. 4.60
Yes Bank Ltd. 4.34
Larsen & Toubro Ltd. 3.90
ICICI Bank Ltd. 3.77
Mahindra & Mahindra Ltd. 3.69
Kotak Mahindra Bank Ltd. 3.32
Axis Bank Ltd. 3.14
HCL Technologies Ltd. 2.75
Top 5 Sectors

As on April 30, 2018, Franklin India Prima Plus held an exposure to 53 stocks. Despite a large number of stocks in the portfolio, the fund allocates as much as 43% to its top 10 holdings. Two stocks in the portfolio - HDFC Bank and Infosys command an allocation of 8.7% and 5.2% respectively, contributing nearly 15% to the total assets. Bharti Airtel, Yes Bank and Larsen & Toubro are among the other stocks in the top 10 holdings.

On analysing the fund's weightage towards sectors, it is found that Banks lead the list with an exposure of 26%. Software stocks follow behind with an exposure around 10%. Pharma, Auto and Consumer Non-Durables are among the other sectors with a 7%-9% weightage each in the portfolio.

Top Gainers in Franklin India Prima Plus's portfolio

Out of the 53 stocks, about 39 stocks have been held for over a year. This gives a sense that the Franklin India Prima Plus prefers to hold the stock for the long term. Among the top performers in the portfolio, with an average holding above 1%, were Tech Mahindra, Voltas and United Breweries. These stocks gained 61%, 57% and 56% respectively over the past year.

There were a few laggards as well. Lupin, Tata Motors and BPCL were among the large-caps that declined in value. These stocks fell by 39%, 26% and 19% respectively.

Suitability of Franklin India Prima Plus (Franklin India Equity Fund)

Large-cap funds are better poised to handle market volatility vis-a-vis mid-and-small caps.

Stable businesses, greater market share, quality of management and the sustainability prospects are factors that seem convincing to take exposure to large-caps at the current level.

Large blue chip companies with strong balance sheets and proven track records could help ride the wave of short-term volatility to a certain extent. Therefore, diversified equity funds with a predominant large-cap allocation can offer stability to your investment portfolio.

At the same time, funds that are restrictive in their investment approach or those funds that invest only in a concentrated portfolio of large-caps can be volatile and may fail to generate adequate returns over the long term. Only a handful of funds are able to deliver a superior risk-adjusted performance. Not all large cap funds are able to consistently outperform the market across market cycles.

Some large-caps take an opportunistic allocation to mid-caps and offer the perfect mix of stability and growth. Therefore, it is pertinent to review large cap funds even on its ability to limit downside during falling markets.

Multi-cap funds offer investors a dynamically managed portfolio. The ability of the funds to vary their portfolio across market-caps based on the market outlook, gives investors an opportunity to earn higher returns.

Some schemes may have either a predominant large-cap or a significant mid-cap allocation. Funds that have a high allocation to large-cap stocks can offer greater stability, while those with a mid-cap bias offer a potential to earn higher returns. Investors can choose an appropriate fund based on their risk appetite and financial goals. These schemes are expected to do better over a volatile market environment. However, you need to choose cautiously.

Franklin India Prima Plus has done well in the past, however, its mediocre performance over the past few years, deserves further introspection. Though the nomenclature of fund is changed, the fund remains in good hands. You need to compare the fund with similar peers, both on quantitative and qualitative aspects, and decide accordingly.

If you plan to invest in multi-cap funds, do ensure that the investments are in line with your financial goals. If you are not sure about how to align these schemes with your tax planning or financial goals, do consult your financial planner or investment advisor.

Note: This write up is for information purpose and not a recommendation to buy or sell the mutual fund scheme. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor.

Editor's Note:

PersonalFN has a long track record of offering unbiased mutual fund research services. It analyses thousands of data points to shortlist schemes and also applies a whole host of qualitative parameters to select only a handful schemes for your portfolio.

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Disclosure: Franklin Templeton Asset Management (India) Pvt is a shareholder in Quantum Information Services Pvt. The views published in the report is independent and is not driven by any influence or association with the fund house.

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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