Mutual Funds: A Pillar Of Support
10/1/2015 3:03 PM Thursday
Franklin India High Growth Cos Fund
The Indian economy’s growth rate is slated to overtake China’s pace this year and the difference might get wider going ahead, according to various agencies. When the Indian economy is expected to grow at a faster pace, Indian companies are also expected in tune with this momentum and every investor would like to be a part of this growth story. Franklin India High Growth Companies Fund, which primarily invests in high-growth companies which tend to grow their earnings at a quick clip, is one of the funds that will definitely help discernible investors.
The fund’s performance since its launch in 2007 has been decent. The fund has been able to beat its category return in every time frame except during the last six months. For example, while the category return in the last seven years has been 15.21 per cent, the fund has, comparatively, generated return of 19.82 per cent in the same time. Even for the last one year the fund has generated return of 15.86 per cent as against 9.92 per cent by category. The fund has also been able to beat its benchmark, CNX 500, every year since its launch barring in 2008 when it underperformed its category by less than 1 per cent. What is also good about the fund is that it has been able to beat its category and benchmark in both falling market (Example: Q1 CY13 and Q3 CY13) as well as in the rising market.
The fund applies a blend of top-down and bottom-up approach to zero in on the right investments. Macro analysis is done to identify the right sectors while micro analysis is applied to pick stocks within these sectors. If we dissect the performance of the fund on the basis of sector selection and stock selection, the excess return generated by the fund over its benchmark is primarily due to stock selection. The fund identifies high-growth companies with the help of valuation matrices such as EV/EBITDA growth rate, price to earnings growth rate, forward price to sales, etc. Almost 80 per cent of the stock is selected from the index (CNX 500), which is its benchmark, and despite this fund has outperformed its benchmark due to better stock selection.
The current portfolio of the fund seems to be more tilted towards large-cap companies, which constitutes 60 per cent of the total portfolio while mid-cap and small-cap constitute 11.3 per cent and 17.2 per cent respectively. In terms of stock, cyclical companies which are likely to be benefited first with the uptick in the economy, such as financials and automobiles, hold a major place in the portfolio. Therefore, this fund is most suited for those investors who believe in the Indian growth story and want to benefit out of it.
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