Franklin India Prima Fund Review: the 25 year old performer!

This is a review of Franklin India Prima Fund: a 25-year-old fund that invests predominantly in mid cap stocks with a mix of value and growth style. Started on Dec 1st 1993, the fund has performed across fund manager changes. R Janakiraman who also manages Franklin Smaller companies has been at the helm since Feb 2008.

Nature of the Fund

Franklin India Prima Fund had a mid cap focus with a bottom up stock selection strategy (focus on stocks first, sector later) that is a blend of growth and value styles. According to the AMC presentation, the fund has maintained 67% exposure to mid caps on average in the last ten years in about 60 stocks as shown below.

Franklin India Prima Fund: Asset allocation history

Franklin India Prima Fund sector weight history

An aum of only about 6500 Crores in its 26th year of operation suggests the importance of distribution channels like banks for pushing mutual funds – HDFC Midcap Opportunities in its 11th year has 21,000 Crore AUM.

The SEBI categorization rules did not change the nature of this fund much aside from its benchmark from Nifty Mid cap 100 to Nifty Midcap 150, which as we see below is important. Going by the scheme document, it will be a lot more mid cap focussed than before as it now has to hold 65% of midcaps and did not have such restrictions earlier. Since its definition of large and midcaps is the same as the official definition now, it makes sense to study past performance.

 Mid & Small cap stocks are defined as companies whose market cap is less than the hundredth stock in Nifty 500 Index.

Franklin India Prima Fund vs Nifty Midcap 150

First, we shall consider the rolling return and rolling risk (standard deviation) of Franklin Inda Prima Fund vs its current benchmark Nifty Midcap 150 since 1998. It should be noted that Franklin Prima has NSE 500 (CNX 500) as its benchmark initially and added CNX Midcap as benchmark only from May 2013. Later NSE Free float Midcap 100 (now NSE Midcap 100) became the benchmark.

Nifty Midcap 150 ( a harder benchmark to beat) is the current benchmark after the SEBI regulations came into force. We must understand that Franklin Prima operated as a multi-cap fund with mid cap bias in the past when we look at the below charts.

We will start with five rolling returns and risk (bottom panel). The number of data points in each colored line is indicated in the chart (eg 1674 below)

 

Five year rolling return and risk for Franklin India Prima fund vs Nifty 150 MId cap Index

The fund did not beat Nifty Midcap 150 regularly in the past but was less volatile.

 

Seven year rolling return and risk for Franklin India Prima fund vs Nifty 150 MId cap Index

Ten year rolling return and risk for Franklin India Prima fund vs Nifty 150 MId cap Index

The story over 7 and 10 year periods is also the same. Franklin India Prima fund has delivered returns close to Nifty Midcap 150 but at lower risk. Considering its benchmark history and since we do not have a mid cap index fund currently and neither had a mid cap index fund or ETF in the past, that is acceptable

Franklin India Prima Fund vs benchmark indices

We shall now consider performance of Franklin Prima from 2004 onwards vs Nifty MIdcap 100, Nifty Midcap 150, Nifty 50 and Nifty 100

Five year rolling return and risk for Franklin India Prima fund vs various benchmarks

Ten year rolling return and risk for Franklin India Prima fund vs various benchmarks

That is more than decent outperformance in terms of returns and risk.

Franklin India Prima Fund vs HDFC Midcap Opportunities vs L&T Midcap

We will now use two peers in Mid cap segment for comparison. The HDFC fund is an obvious choice. The L&T fund was chosen at random. Someone wanted its review and you can the follow graphs for that purpose as well. A detailed review of HDFC Mid-Cap Opportunities Fund can also be consulted.

Five year rolling return and risk for Franklin India Prima fund vs HDFC MIdc ap opportunities vs L&T Midcap Fund

Seven year rolling return and risk for Franklin India Prima fund vs HDFC MIdc ap opportunities vs L&T Midcap Fund

Ten year rolling return and risk for Franklin India Prima fund vs HDFC MIdc ap opportunities vs L&T Midcap Fund

The L &T fund although comparable or better than Franklin Prima fund in terms of return is much more volatile. HDFC Midcap Opportunities has outperformed Prima on both counts and is a star in the mid cap fund space.

Overall Recommendation

Existing investors in Franklin Prima Fund: Continue! It may not always produce the best returns in the short term, but it has always been a low volatile fund and that, in this space is worth its weight in gold.

New investors looking for a mid-cap fund: Pick this! HDFC Mid cap Opp is without a doubt one of the best funds in this space. However, the next time the market moves “up”, its AUM will only swell further (if it does not limit inflow). So there is a risk of its performance dropping. Franklin Prima at 6,500+ Crores still has plently of breathing space.

Remember, it is immature to want to invest in “the best fund”. All we want is a consistent performer that does not draw too much attention (especially from young investors). Franklin Prima fits the bill exactly.


About the Author M Pattabiraman author of freefincal.comM. Pattabiraman is the co-author of two books: You can be rich too with goal based investing and Gamechanger. “Pattu” as he is popularly known, publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis, including a robo advisory template for use by beginners. Contact information: freefincal {at} Gmail {dot} com He conducts free money management sessions for corporates (see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints.

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Updated: March 9, 2019 — 1:11 pm

8 Comments

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  1. Thanks for the analysis. I had invested heavily in Prima Plus fund. Now it has become Equity fund.

    Do you think I should continue with it?

  2. Other than HDFC midcap opportunities, what could be the best consistent fund in midcap segment.?

  3. Hi Pattu Sir!

    Can you compare Sundaram Midcap with Franklin Prima Midcap? I have just started investing in Sundaram Midcap for long term (30 years target). Is Sundaram midcap okay for long term or should i look for Franklin. I have just started investing (2 months) so can switch funds. ( I understand midcap are very risky and volatile thats why have chosen long term)

  4. Hi Sir,
    Currently, I invest only in HDFC hybrid equity for my retirement which is 20 years away. I am thinking of adding a mid cap fund as well to my portfolio? But I am confused which one to choose – nifty next 50 (which I remember you mentioning that it is more of a mid cap than large cap) vs Franklin prima fund. What is your opinion please?

  5. Dear Pattu,

    Very good analysis, given clarity among major mid cap funds. This helps all us a lot.

    Please do the same for Small cap segment also like Frnklin Small companies Vs L&T Emerging business Vs DSP Small cap. I am sure this will also help for many of your readers.

    Best Regards
    Sriniwaas

  6. looks like an ETF for nifty midcap 150 is coming on 25th from reliance.
    in another post you said stay away from etf, why is that?

  7. Dear Sir,
    Thanks a lot for the detailed analysis. Please let me know which of your calculator should I use to visualize the Rolling Risk and return as you shown here. I tried the rolling risk visualizer and followed your article where you have started using the capture ratio but I couldn’t find the exact calculator that would help me plot rolling risk vs return by choosing all the smart indices as BMs.

  8. When i look at the data of Dec18 Benchmark sheet, I find that the data of L&T midcap fund is more impressive than Franklin Prima.

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