Invest Wisely: Franklin India Low Duration Fund Guide

The Franklin India Low Duration Fund is an open-ended income fund that has been operational for over 2 decades. The fund seeks to provide regular income for investors by primarily investing in highly-rated debt securities. It is ideal for investors who want to invest for 1-3 years and are looking for an alternative to bank deposits. The fund has a low-risk profile and is comparable to short-term fixed deposits, with an average maturity period of 1 year. The fund invests in corporate bonds and other fixed-income instruments, with an average yield to maturity of 10.2%. The Franklin India Low Duration Fund offers both regular and direct plans, with the main difference being the commission paid to a broker/distributor, which results in different expense ratios.

The investment objective of the Franklin India Low Duration Fund

The Franklin India Low Duration Fund is an open-ended income fund that seeks to earn regular income for investors by investing primarily in highly-rated debt securities. The fund has a stated objective of providing nominal returns by assuming low risks. It is comparable to short-term fixed deposits and has an average maturity period of 1 year.

The fund invests in corporate bonds and other fixed-income instruments, with a focus on low-interest rate sensitivity and low credit quality. The number of instruments held by the fund is typically high, with an average yield to maturity (YTM) that is higher than the category average. This diversification strategy has resulted in higher returns for investors.

The Franklin India Low Duration Fund is suitable for investors who want to invest for 1-3 years and are looking for an alternative to bank deposits. It is also ideal for those who want to park their funds for a short duration while earning decent returns at low risk.

The fund offers both Regular and Direct plans, with the main difference being the commission paid to a broker/distributor. Direct plans have a lower expense ratio, leading to higher returns for investors. Additionally, investors have the option to choose between Growth and Dividend plans. Dividend plans offer regular payouts, while Growth plans have no intermediate payouts, allowing funds to remain invested and generate returns through capital appreciation.

The fund's performance overview

Franklin India Low Duration Fund is an open-ended income fund that has been operational for over 2 decades. The fund seeks to earn regular income for investors through investment in highly-rated debt securities. The fund is suitable for investors who want to invest for 1-3 years and are looking for an alternative to bank deposits. The fund has a low-risk profile and is comparable to short-term fixed deposits.

The fund has an average maturity period of 1 year and invests in corporate bonds and other fixed-income instruments. The number of instruments held by the fund is 90, with an average maturity of 0.88 years. The yield to maturity is 10.2%, which is higher than the category average of 8.7%. The fund has a wide range of instruments, including HDFC, Greenko Clean Energy Projects, Essel Infraprojects, National Bank Agr. Rur. Devp, Small Business Fincredit, Ma Multi-Trade, and more.

The fund has a low-risk profile, and the returns tend to fluctuate and are not guaranteed. The returns tend to fall in a raising interest rate scenario and rise during a falling interest rate scenario. The fund is ideal for investors who intend to park their funds for a short duration and earn decent returns at low risk.

The latest NAV (Net Asset Value) of the fund, as of 7th August 2022, was ₹ 32.6071 for the Growth option and ₹ 28.6858 for the Direct-Growth option.

The portfolio composition of the fund

The Franklin India Low Duration Fund is a mutual fund that seeks to provide regular income for investors by primarily investing in highly-rated debt securities. The fund is managed by Franklin Templeton Mutual Fund and is suitable for investors looking for an alternative to bank deposits with a short investment horizon of 1-3 years. The fund has a low-risk profile and an average maturity period of 1 year.

• HDFC 353-D 28/02/2019
• 10.75% Greenko Clean Energy Projects 2020
• Essel Infraprojects 2020
• Structured Obligation
• National Bank Agr. Rur. Devp 170-D 31/01/2019
• 9.4% Small Business Fincredit 2020
• 10.5% Ma Multi-Trade 2021
• 9.6% Renew Power 2021
• 8.4% Edelweiss Commodities Services 2020
• Wadhawan Global Capital 2020
• Clix Capital Services 2023
• 9.2% DLF Home Developers Ltd 2019
• 8.25% Vodafone Mobile Services 2020
• Yes Capital India 2020
• Structured Obligation
• Aspire Home Finance Corp. 2023
• 10.9% Vodafone Idea 2023
• Renew Solar Power 2022
• Reliance Infrastructure Consulting & Engineers 2021
• 10.15% Uttar Pradesh Power Corporation 2021
• 7.99% Tata Power 2020
• Non-Convertible Debenture
• Vastu Housing Finance Corp. 2023
• Edelweiss Commodities Services 2021
• Aspire Home Finance Corp. 2023
• 10.15% Uttar Pradesh Power Corporation 2020

The fund has invested in instruments with lower credit ratings, resulting in a higher risk level but also potentially higher returns, as evidenced by its YTM.

The tax benefits of investing in the fund

The Franklin India Low Duration Fund offers a range of tax benefits for investors. Firstly, the fund provides a tax advantage on capital gains, depending on the holding period. Long-term capital gains (LTCG) held for more than 36 months are taxed at 20% with indexation, while short-term capital gains (STCG) held for less than 36 months are taxed at the income tax slab rate.

Additionally, investors do not pay taxes on dividends received from the fund. However, a Dividend Distribution Tax (DDT) is deducted at source, with rates varying for individuals and other entities. For individuals, the DDT is 29.12%, including surcharge and cess, while for other persons, it is 34.944%.

For non-resident Indian (NRI) investors, LTCG taxes are charged at a lower rate of 10% without indexation for units redeemed from unlisted schemes.

The fund also offers a growth option, where returns are reinvested, and a dividend option, where payouts are made regularly. The growth option may provide higher returns over time, as all profits are reflected in the Net Asset Value (NAV) of the fund.

Furthermore, the Franklin India Low Duration Fund is suitable for investors seeking alternatives to bank deposits, with a recommended investment period of 1-3 years. The fund's low-duration nature makes it less risky to interest rate changes, providing stable returns for investors.

The plans and options available for the scheme

The Franklin India Low Duration Fund is an open-ended income fund that offers regular and direct plans. The fund seeks to provide regular income for investors by investing primarily in highly-rated debt securities. The objective is to generate nominal returns with a low-risk assumption. The fund is suitable for investors looking for short-term investments of 1-3 years and has a low-risk profile associated with it.

The Regular plan involves a broker between the fund house and the investor, while the Direct plan does not involve any intermediary. Both plans have the same underlying funds but differ in their expense ratios. Regular funds have a higher expense ratio due to the commission paid to the broker, while direct funds have a lower expense ratio, leading to higher returns for investors.

The Franklin India Low Duration Fund also offers growth and dividend options. The growth option does not have intermediate payouts, allowing funds to remain invested and generate returns through capital appreciation. In contrast, the dividend option provides regular payouts of dividends, with the option for reinvestment.

Additionally, the fund offers Monthly Dividend (MD) and Quarterly Dividend (QD) plans, providing investors with flexibility in terms of dividend frequency.

Frequently asked questions