Franklin India Bluechip Fund holds the distinction of being the largest diversified equity fund in the country and has been in existence for over 10 years now.
The fund is positioned as a large cap offering and to its credit has held on to its mandate despite the run-up in stocks from the mid cap segment in the recent past. Also FIBF has clocked an impressive performance over longer time frames as can be seen from the table below.
FIBF: Glorious past
| Rank | Diversified Equity Funds | NAV (Rs) | 1-Yr | 3-Yr | 5-Yr | Incep. |
| 1 | MAGNUM CONTRA | 16.02 | 64.18% | 54.54% | 35.21% | 26.76% |
| 2 | FRANKLIN INDIA PRIMA | 116.49 | 52.41% | 60.94% | 32.41% | 24.10% |
| 3 | RELIANCE VISION | 87.46 | 33.47% | 61.33% | 30.90% | 25.63% |
| 4 | RELIANCE GROWTH | 123.39 | 56.31% | 67.27% | 27.81% | 30.32% |
| 5 | BOINANZA EXCL | 18.63 | 22.08% | 35.71% | 24.43% | 11.84% |
| 6 | HDFC EQUITY | 67.34 | 24.09% | 43.16% | 22.90% | 21.04% |
| 7 | TATA EQUITY OPP. | 28.65 | 28.53% | 51.67% | 22.81% | 8.56% |
| 8 | GIC FORTUNE 94 | 18.84 | 23.78% | 38.53% | 21.38% | 7.05% |
| 9 | UTI MASTER VALUE | 19.53 | 23.76% | 45.79% | 18.94% | 28.48% |
| 10 | FRANKLIN INDIA BLUECHIP | 62.85 | 14.42% | 39.64% | 18.29% | 27.68% |
Over the 3-Yr period, FIBF has posted a growth of 39.64 per cent CAGR; the fund's net asset value has appreciated by 18.29 per cent CAGR over the 5-yr period. Now for the worrisome part, FIBF's performance (14.42 per cent) over the 1-yr period has been dismal to say the least. Even if the fund's restrictive investment mandate (to focus on well-established large-size companies) were to be factored in, the performance is difficult to justify.
The gravity of the situation can be understood by comparing how the fund performs vis-à-vis other players from the diversified equity funds segment. We have listed the top performing funds from the abovementioned category over the 1-yr period.
Top performing diversified equity funds
| Rank | Diversified Equity Funds | NAV (Rs) | 1-Mth | 6-Mth | 1-YR |
| 1 | MAGNUM GLOBAL | 17.69 | -1.23% | 41.16% | 82.36% |
| 2 | DISCOVERY STOCK | 9.64 | -4.18% | 29.92% | 64.22% |
| 3 | MAGNUM CONTRA | 16.02 | -2.97% | 39.66% | 64.18% |
| 4 | TAURUS STARSHARE | 18.57 | -6.16% | 32.45% | 63.04% |
| 5 | SUNDARAM SEL. MIDCAP | 38.79 | -0.28% | 35.69% | 58.15% |
| 6 | UTI - DYNAMIC EQUITY | 23.29 | -3.88% | 38.47% | 57.68% |
| 7 | RELIANCE GROWTH | 123.39 | -0.53% | 36.98% | 56.31% |
| 8 | FRANKLIN INDIA PRIMA | 116.49 | -1.25% | 35.69% | 52.41% |
| 9 | HDFC CAPITAL BLD. | 36.61 | -2.05% | 30.81% | 52.29% |
| 10 | BIRLA MIDCAP | 33.21 | -1.22% | 33.80% | 51.09% |
| 59 | FRANKLIN INDIA BLUECHIP | 62.85 | -5.53% | 16.00% | 14.42% |
FIBF which featured among the top 10 diversified equity funds over the 5-yr time frame languishes at the 59th position over the 1-yr period. Expectedly funds which invest predominantly in the mid cap segment (Magnum Global, Magnum Contra and Sundaram Select Mid Cap among others) rule the roost. The dominance of the mid cap segment can be further gauged by comparing the performances of benchmark indices like BSE Sensex vis-à-vis BSE 500.
(Values have been rebased to 100)
The sharp run-up in the BSE 500 as seen in the graph above is indicative of the strong performances pitched in by the stocks from the mid cap segment. On the other hand the large cap segment (broadly represented by the BSE Sensex) has registered a modest growth rate. While one would expect a fund like FIBF which invests in the large cap segment to lag its mid cap peers, it is the wide disparity in performance that is questionable.
Now lets compare how FIBF has delivered vis-à-vis its fund house peers like FT India Balanced and FT India MIP.
FIBF: The poor cousin
| Scheme Name | NAV (Rs) | Equity Mandate | Equity Holding | 1-Yr |
| FRANKLIN INDIA BLUECHIP | 62.85 | Above 60% | 97.36% | 14.42% |
| FT INDIA BALANCED | 19.19 | 51% - 70% | 67.23% | 13.48% |
| FT INDIA MIP | 17.26 | Upto 20% | 20.26% | 7.53% |
Critics might argue that the dynamics governing a balanced fund or a monthly income plan are vastly different from those of a diversified equity fund. We agree with the view that only similar nature schemes should be compared; also we are not suggesting that investors would be better off investing in FT India Balanced or FT India MIP as compared to FIBF. We also maintain that higher risk mutual funds like equity-oriented funds are best gauged over longer time frames like 3-5 years vis-à-vis MIPs. However the comparison is necessary to put in perspective FIBF's 'risk adjusted' performance.
Over the 1-yr period, FT India Balanced (13.48 per cent) a balanced fund which holds approximately two-thirds of its corpus in equities has been marginally outperformed by its diversified equity fund peer Franklin India Bluechip (14.42 per cent). Similarly FT India MIP (which invests around one-fifth of its corpus in equities) has clocked a growth of 7.53 per cent over the 1-yr period.
FIBF's risk-return trade-off performance is rather skewed; despite holding a substantially higher equity component (nearly the entire corpus is invested in equities) and thereby having exposed investors to high risk levels, the fund has failed to adequately compensate its investors for the risks borne. An investor who owns all three funds in his portfolio, is not being rewarded adequately for the higher risk he has undertaken in FIBF vis-à-vis FT India Balanced and FT India MIP.
So is it time for investors to discard their holdings in FIBF? We don't think so. There is a place for funds of the large cap variety in every portfolio and FIBF fits that bill well
This is especially pertinent in view of the fact that funds of the multi cap variety and those investing pre-dominantly in the mid cap segment have attracted a lot of investor interest in recent times. However investors must note that FIBF's fortunes will be closely linked to the performance of stocks from the large cap segment and the same should be factored in before making an investment decision.
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