For many investors, the first stop in mutual fund investing is usually a well diversified, large-cap oriented fund with low volatility and fairly decent returns. `Franklin India Prima Plus' launched in Sep. 29, 1994 would fit this bill. Though the scheme objective is to provide growth of capital and regular dividend from a portfolio of equity, debt and money market instruments, the fund manager has not yet forayed into the debt market and is fully invested in equities.

Franklin India Prima Plus is a diversified equity plan, which invests in a portfolio of large, mid and small-cap stocks. The fund has registered a good return of 22.89% (annualized) since inception as against benchmark (S&P CNX Nifty) return of 8.67%. The fund has performed fairly well over the longer term horizon, posting annualized returns of 11.89% and 36.7% for the last one and three years respectively, easily outperforming the modest 2.60% and 26.71% gains recorded by the benchmark index CNX Nifty 500 over the comparable period.

Over the years, the fund has continued to give better returns than its category median as well. Over the past one year and six months it posted returns of 11.89% and 10.96% respectively, well above the category median. The fund has registered beta of 0.86 (a measure of how volatile the returns are) and a Sharpe ratio of 0.31 (an indicator named after the Nobel Laureate William Sharpe, which computes the returns achieved for the unit risk taken by the fund manager), indicating moderate risk. It also reported a big jump in assets under management that has climbed 37.26% to Rs 949 crore as on March 31, 2007, compared with previous year's level of Rs 691 crore.

The equity portfolio of the scheme is well diversified; it started off as a stock collector and had nearly 200 stocks in its kitty by March 1996. The relentless streamlining of the portfolio took years and the January 2001 portfolio revealed 40 scrips. It is now currently spread around 17 sectors with over 45 to 50 stocks.

Infosys Technologies, Bharti Airtel, Motor Industries, Kotak Mahindra Bank and Television Eighteen are the top five holdings, which contribute 25.44% to the total portfolio. Consumer non-durable, software and media & entertainment are the top three sectors contributing 30.48% of the overall portfolio. Among the newly listed companies, Global Broadcast News forms a part of the fund portfolio. Following the trend in the market the fund manager has changed its sectoral allocation of funds. The contribution of consumer non-durable and IT sector to the total portfolio has increased to 11.59% and 10.12% respectively in March 2007 from 7.82% and 8.57% in September 2006. The top 10 holdings contribute 41.63% to the total portfolio. Over the years, the fund has maintained its exposure to large cap stocks at about 60% to 70% which brings stability to performance.

The portfolio has seen a fair amount of churning in the month of March. The fund manager added Hindustan Lever Limited, Idea Cellular, Reliance Communications, SBI, HDFC and Pfizer to its portfolio in March `07 whereas it has exited Bajaj Auto, Jai Prakash Associates, Power Finance Corporation and Network Eighteen Fincap. It has almost doubled its shareholding in Cipla and fairly increased its share in TV Eighteen and Asian Paints. However, it has reduced Grasim Cement, which currently accounts for 3.40% of total assets compared to 7.81% six months back. The fund manager is also positive about retail sector as he added Shoppers Stop and Trent to its portfolio and increased Pantaloons share in the portfolio too. The fund has maintained its current cash position at 7.39%.

The essence of the fund is that it may not offer very high returns, but it definitely offers peace of mind with fairly good returns. Even during periods when the category delivered negative returns, returns from this fund fell by a lower percentage.

Sukumar Rajah, who holds a B.E. from University of Roorkee and an MBA from IIM, Bangalore, manages Prima Plus. When queried by myiris about the asset allocation strategy, he said Prima Plus invests in wealth creating companies whose competitive advantage will translate into superior return on capital. "We follow a bottom up approach to stock picking and choose the best companies irrespective of their sector classification. Our research focuses not only on the track record of the company, but also on their future strategies and their ability to continue to generate wealth on a sustained basis in a competitive business environment. This strategy has helped us in providing superior risk-adjusted returns over the last 12 years through various market cycles."

Sukumar added that he strongly believe that investors should have a medium to long term view while investing in growth markets like India. An Indian market has much better balance in its growth model than the rest of the Asian region - giving it a built-in macro resilience that other emerging economies lack. Any sharp corrections from these levels can be used to increase exposure to equities.