Investors can consider buying the units of Franklin India Taxshield (Franklin Tax) Fund, considering its long-term track record in delivering steady returns and its ability to contain downsides.
The fund has managed to better the returns of its benchmark, the S&P CNX 500, over one-, three- and five-year periods.
Over a five-year period, Franklin Tax has delivered a compounded annual return of 13.3 per cent, placing it among the top few funds in this category.
The fund delivers steady returns during periods of market upswing, while during periods of market volatility, it has managed to contain downsides better than its benchmark and peers.
Franklin Tax may be suitable for investors who don’t have much of an appetite for risk and who prefer steady rather than top-of-the-line returns.
Performance, strategyFranklin Tax has a track record of nearly 10 years. The fund has been delivering steady returns over the years. Over the last three years, the performance of the fund has been better than peers such as Reliance Tax Saver, ICICI Pru Tax plan and HDFC Tax Saver.
During market upswings, the fund delivers average returns. Over a five-year period, it has consistently managed to outperform its benchmark, though not by a huge margin. But during periods of downturn, the fund has managed to contain downsides significantly. During market downturns in 2006, 2007 and the protracted correction in 2008, Franklin Tax has managed to contain losses better than its benchmark and similar tax planning funds. This makes it suitable for investors with a low-risk appetite.
The fund has a predominantly large-cap stocks (greater than Rs 7,000 crore market capitalisation) bias. But mid-cap stocks do figure prominently with nearly 30 per cent of the portfolio invested in such stocks in 2007.
But this has been brought down over the past year and is at 21 per cent levels. A large-cap stocks bias may serve the interests of investors better in the current market conditions as such companies may have better revenue and earnings visibility.
Large-cap stocks also tend to recover earlier than mid or small-cap stocks when the markets recover.
PortfolioFranklin Tax appears to have taken increased exposure to defensive sectors, going by its recent portfolio.
Consumer non-durables is the top sector held, with as much as 18.2 per cent of the portfolio invested in this sector.
Telecom is another sector that figures in prominence. The top performing sectors of 2007, such as capital goods, finance and banks have seen reduced exposures.
But there is fair bit of stability in terms of number of stocks in the fund kept at a little over 40. But even in the downturn of 2008, Franklin Tax has managed to remain invested in equities to over 90 per cent of the portfolio and has not moved significantly into cash.
Fund Facts: The NAV per unit of the growth option is Rs 94.8. Mr Anand Radhakrishnan manages the fund.
source: Business Line
