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Suresh Krishnamurthy

FRESH investments can be considered in Franklin India Prima. Prima, which focuses on mid and small capitalisation companies, follows an aggressive strategy. It is one of the attractive options for an exposure to such companies. Prima has delivered reasonable risk-adjusted returns in the past and can be considered for diversifying the portfolio.

The performance of funds focused on small and mid-cap companies do well in a period of rising prices, out performing indices by a long margin. However, in a period of falling prices, the impact on the net asset value of a fund such as Prima will be relatively larger. Since the potential for downside exists, investors can calibrate their investments into the fund over the next few months.

Performance: The performance of Prima has been consistent with what can be expected during periods of rising and falling prices. After a considerably disappointing period in 2000, Prima has delivered impressive returns to investors. In the past two years, Prima's net asset value has appreciated by about 45 per cent. During the same period, S&P CNX 500 recorded a decline of about 2.5 per cent. Performance of small and mid-cap stocks has been impressive during this period and Prima has taken full advantage of such a trend. Over a longer period of five years, the fund has significantly out performed indices such as S&P CNX Nifty and S&P CNX 500.

Portfolio composition: At the end of March, the fund had a cash position of about eight per cent of net assets. The fund holds a considerably diversified portfolio of more than 40 stocks. Given the higher risks involved in an investment in mid and small cap companies, such larger diversification is necessary.

In terms of sectors, the top exposures were banks, commodity chemicals, fertilisers and healthcare. These sectors accounted for 37 per cent of net assets. The top stock picks were Oriental Bank, Goodlass Nerolac, Raymond, Gujarat Gas and Cummins India. These stocks accounted for 32 per cent of net assets.

Suitability: The risk involved in an investment in Prima needs to be considered as higher relative to an investment in an Index Fund. The fund can also be considered for holding along with an equity fund that invests largely in large capitalisation stocks.

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