Last Updated on December 29, 2021 at 5:18 pm
Investors in Franklin India Smaller Companies Fund are worried about its recent drop in performance. Is this because of the fund manager or because of the overall slump in smallcap stocks? We evaluate recent risk and reward of the fund with respect to its benchmark to find out what investors should do with the fund. Can new investors also consider this fund?
Regular readers may recall the review of this fund published in early 2019 where we pointed out its low volatility and performance. Let us now look at its recent performance. DIY investors can easily perform a similar analysis with any fund.
Before we begin, over 700 members have signed up for the video lecture series on Goal-Based Portfolio Management: Techniques to reduce fear, uncertainty, & doubt. This will discuss strategies to use and manage the right asset allocation no matter what the market condition is. Details about joining are available in this FAQ page.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
As mentioned before, most of the investors in mutual funds in the last few years are new and have flocked to mid and smallcap mutual funds based only on their recent performance. Many are now disappointed that their funds are not able to replicate their past success. This is immature, to say the least.
Investors will need to consider the movement of the fund’s benchmark and how the fund has fared relatively before judging a fund. We saw how HDFC Mid-Cap Opportunities Fund has done quite well in spite of investor fears.
Let us now take a look at this Franklin Smallcap fund that started out as a closed-ended mid and smallcap fund. See fund review linked above for full history.
Franklin India Smaller Companies Fund vs Nifty Smallcap 250 – TRI
First, let us look at absolute returns for periods of less than a year. The fund has not done well in terms of downside protection. This is, while returns do not matter for such short periods, it is reasonable to expect an actively managed fund to fall less when the index is down.
| Month | Fund | Index |
| 1 | 4.54 | 7.20 |
| 2 | 3.15 | 5.59 |
| 3 | 5.47 | 11.71 |
| 4 | 7.62 | 11.32 |
| 5 | 7.00 | 11.28 |
| 6 | -1.67 | 1.28 |
| 7 | -6.31 | -4.46 |
| 8 | -1.92 | -1.10 |
| 9 | -6.36 | -6.40 |
| 10 | -3.21 | -3.17 |
| 11 | 1.78 | 3.98 |
However, if we look at annualized returns for longer durations, the fund has fared better. Although the fund has operated as a small cap fund only from 4th June 2018, it’s market cap history (see below) is fairly homogenous.
| Months | Fund | Index |
| 12 | -2.29 | -3.13 |
| 13 | 1.28 | 1.13 |
| 14 | -1.33 | -2.43 |
| 15 | 3.19 | 4.46 |
| 24 | -9.98 | -15.79 |
| 36 | 5.20 | 2.61 |
| 48 | 8.74 | 4.09 |
| 60 | 9.24 | 5.14 |
The fund has fared reasonably well since it started operations as a “pure” smallcap fund as seen in the featured image above.
The downside capture ratio is shown below for three different durations. A down capture ratio of 75% implies the fund has only captured 75% of the benchmark losses in the last three years whenever the benchmark fell down. These numbers are fairly impressive.
2017-Jan To 2020-Jan 75%
2018-Jan To 2020-Jan 68%
2019-Jan To 2020-Jan 66%
Should I Exit Franklin India Smaller Companies Fund?
Although the fund has had a poor run in the last year or so, its long-term performance is quite good. Investors should not dismiss this fund on the basis of the recent underperformance. Funds in this segment tend to be mercurial: large up and down movements. Comparatively, this is a sedate performer avoiding huge up or downswings.
New investors looking for smallcap exposure, but with a mature, long-term view can also consider this fund.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)