Why these Franklin Templeton funds got downgraded

Our analyst recently downgraded Franklin India Flexi Cap and Franklin India Taxshield.

The prime reason being the change at the helm. In May 2016, Lakshmikanth Reddy took over as the lead fund manager for both, while Janakiraman was named co-manager.

Reddy came on board Franklin Templeton Mutual Fund last year. He has yet to establish his credentials as a portfolio manager on mutual fund products over the long term. Hence the downgrade.

Having said that, we believed that the funds still deserved a positive rating. We find Reddy’s views to be consistent with the fund house’s views on the funds in terms of the respective investment strategy and the way it is managed. He also has strong support from an experienced and stable investment team. We draw confidence from the team-driven investment approach for which Franklin Templeton is known.

Consequently, though the funds get downgraded, they still merit a positive rating (Bronze) and not a Neutral or Negative.

To obtain a more detailed understanding about the funds, in terms of the type of stocks the fund manager invests in and the investment process he follows, download the detailed reports: Franklin India Taxshield and Franklin India Flexi Cap. 

FT

What the ratings indicate

The Morningstar Analyst Rating for Funds is a forward-looking analysis of a fund. The analyst looks at 5 key areas crucial to predicting the future success of a fund: People, Parent, Process, Performance, and Price.

Gold / Silver / Bronze: These are the top three ratings and are all positive. While all indicate that our analysts think highly of a fund, the difference between them corresponds to differences in the level of analyst conviction in a fund’s ability to outperform its benchmark and peers through time, within the context of the level of risk taken over the long term*.

Neutral: These are funds in which our analysts don’t have a strong positive or negative conviction over the long term*.

Negative: These funds possess at least one flaw that our analysts believe is likely to significantly hamper future performance over the long term*.

* Long term is defined as a full market cycle or at least 5 years.

Source: Morningstar India Website