Franklin India Smaller Companies Fund is a closed-end equity fund. The fund invests 75 per cent of its portfolio in shares of small companies. The fund had a good run since its launch in Dec 2005 and gained 77 per cent till January 2008 but has lost all its gains in past six months. The NAV is marginally below its face value in August 2008.
Small and mid-cap stocks generally do better than large caps in a rising market but also have larger downside in a struggling market. This is evident in the brief history of the fund so far.
If the market does not witness a sharp turnaround soon, the fund is unlikely to be in good health. Even in case of broad market turnaround the small and mid-caps follow with a lag. Given the state of the market and not very a rosy outlook for the immediate future, one cannot be very optimistic about this fund's performance.
This fund could be small part of a well diversified equity portfolio, but if this is the only fund you own then you should switch to a diversified equity fund.
Franklin India Smaller Companies Fund has a five-year term.
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