Should I continue with Franklin India Equity Fund?

I have been investing through SIPs in Franklin India Equity Fund for the past four years. But it is found to be underperforming, compared to its benchmark. Please advise me whether I should continue (or discontinue) with this scheme. If I have to discontinue, which fund of the AMC should I choose?
-Balakrishnarao Kadiri

Rushabh Desai, an Amfi-registered mutual fund distributor based in Mumbai, responds:

Franklin India Equity Fund is currently a multi-cap fund but following the recently introduced flexi cap category allocation within different market capitalizations. The fund is one of the oldest in the mutual fund industry and is managed by a highly qualified and experienced fund manager. The fund follows a blended investment style more inclined towards value. Unfortunately, the fund’s strategy has seen a massive underperformance due to unflavoured stock selection. In this polarised growth-oriented market cycle, the value stock picks in the fund have not performed well.


On a one-to-five-years rolling basis, the fund has underperformed both the category average and the S&P BSE 500 TRI on all respective periods. The fund has marginally outperformed the benchmark on a 7, 10, and 12-year rolling period. The fund has generated the one of the lowest ROE (return on equity) and Alpha (Jenson’s Alpha) compared to its category average.

There is no doubt that the fund has been a stellar performer since its inception but observing the valuation cautious strategy, the fund is bound to be cyclical and may not outperform all the time. Will the fund show outperformance going forward? At some point, may be when the market cycle changes and supports the unflavoured stock selection in the fund. But only time will tell when.

Until the fund shows some outperformance, I would recommend you to stop your SIP in it. At this point due to the new guidelines by SEBI on the multi cap category and the recently introduced flexi cap category I would recommend you to choose any of the following funds from the focused category: Axis Focused 25 Fund, SBI Focused Equity Fund and Mirae Asset Focused Fund.