Smaller Companies, Bigger Returns: Investing In Franklin India's Future

The Franklin India Smaller Companies Fund is a mutual fund scheme from Franklin Templeton Mutual Fund. It is a small-cap fund that predominantly invests in small companies to provide long-term capital appreciation. The fund has been in existence for over 11 years, with an expense ratio of 0.9% and an exit load of 1% if redeemed within 1 year. The fund has delivered average annual returns of 23.18% since its inception and has an AUM of over ₹14,000 crores. Investors can purchase the fund directly from the Franklin Templeton Mutual Fund website or through platforms like MF Central and MF Utility.

Where to buy Franklin India Smaller Companies Fund

The Franklin India Smaller Companies Fund can be purchased directly from the website of the fund house, Franklin Templeton Mutual Fund. It can also be bought through platforms like MF Central, MF Utility, and ET Money. If you are uncomfortable buying mutual funds online, you can seek help from a mutual fund distributor, such as a bank.

On the ET Money website, investing in the Franklin India Smaller Companies Fund can be done in a few simple steps:

• Click on the "Invest Now" button on the top right-hand side of the page.
• Enter your email ID and select whether you want to make a one-time investment or start a Systematic Investment Plan (SIP). Specify the amount.
• Provide a few more details, including the bank account from which you will be making the payment, and confirm your investment.

The fund has an AUM of ₹14,423 Crore as of 30/09/2024 and is considered a medium-sized fund in its category. It has delivered average annual returns of 23.18% since its inception in 2013.

Capital gains taxation

Short-Term Capital Gains Taxation:

If you sell the mutual fund units within 1 year from the date of investment, your gains will be subject to short-term capital gains tax. The entire amount of the gain is taxed at a rate of 15%. This means that if you sell your units after holding them for less than a year and make a profit, you will need to pay 15% tax on that profit.

Long-Term Capital Gains Taxation:

On the other hand, if you sell the mutual fund units after 1 year from the date of investment, the capital gains taxation rules are different. For long-term capital gains, gains up to Rs. 1 lakh in a financial year are exempt from tax. This means you don't have to pay any tax on profits of up to Rs. 1 lakh if you sell your units after holding them for more than a year. However, gains over Rs. 1 lakh are taxed at a rate of 10%. So, if your profit exceeds Rs. 1 lakh, you will need to pay 10% tax on the amount above Rs. 1 lakh.

Dividend Taxation:

Dividends from the Franklin India Smaller Companies Fund are added to the income of the investors and taxed according to their respective tax slabs. Additionally, if an investor's dividend income exceeds Rs. 5,000 in a financial year, the fund house will deduct a Tax Deducted at Source (TDS) of 10% before distributing the dividend. This means that if your dividend income is more than Rs. 5,000 in a year, you will automatically have 10% deducted as tax before receiving your dividend payment.

No Tax on Holding Units:

It is important to note that as long as you continue to hold the mutual fund units without selling them, you do not have to pay any tax. The tax is only applicable when you sell the units and realise a capital gain.

Lock-in Period:

The Franklin India Smaller Companies Fund does not have any lock-in period. This means you are free to sell your units at any time, but it is generally recommended to hold equity mutual funds for the long term to ride out the short-term fluctuations in the stock market.

In summary, when investing in the Franklin India Smaller Companies Fund, it is crucial to consider the capital gains taxation rules to make informed investment decisions and understand the tax implications of your transactions.

Riskometer level

The Riskometer level of the Franklin India Smaller Companies Fund is "Very High". This means that investors understand that their principal will be at very high risk.

The fund has 94.98% investment in domestic equities, of which 2.52% is in Large Cap stocks, 9.13% is in Mid Cap stocks, and 50.02% in Small Cap stocks. The fund has 0.17% investment in Debt, of which 0.17% is in Government securities.

The fund has no lock-in period. However, investors are warned not to invest in this or any other small-cap fund if they need to redeem their investment in less than seven years.

Portfolio

The Franklin India Smaller Companies Fund is a small-cap fund that predominantly invests in small companies to provide long-term capital appreciation. As of 31st July 2024, the fund's portfolio had a turnover ratio of 26.00%, with 94.98% equity holding, 0.00% F&O holdings, and 0.00% foreign equity holdings. The fund's top 10 stocks in its portfolio as of 31st July 2024 were:

• Brigade Enterprises Ltd.
• Kalyan Jewellers India Ltd.
• Equitas Small Finance Bank Ltd.
• Karur Vysya Bank Ltd.
• Crompton Greaves Consumer Electricals Ltd.
• Amara Raja Batteries Limited
• Aster DM Healthcare Ltd.
• J.B. Chemicals & Pharmaceuticals Ltd.
• Multi Commodity Exchange of India
• Other financial services

As of 29th February 2024, the fund had invested 92.63% in equity, 7.12% in cash and cash equivalents, and 0.25% in debt. The fund has a mandate to invest at least 65% of its assets in small-cap stocks at all times.

How to invest

Franklin India Smaller Companies Fund is a mutual fund that can be purchased directly from the website of the fund house, Franklin Templeton Mutual Fund. You can also buy mutual funds through platforms like MF Central and MF Utility. If you are uncomfortable buying mutual funds online, you can seek help from a mutual fund distributor, such as a bank.

On the ET Money app, investing in the Franklin India Smaller Companies Fund can be done in a few simple steps:

• Click on the "Invest Now" button on the top right-hand side.
• Enter your email id and select whether you want to do a one-time investment or start a SIP (Systematic Investment Plan). Add the amount you wish to invest.
• Provide further details, including the bank account from which you will be making the payment, and confirm.

The Franklin India Smaller Companies Fund has a minimum SIP amount of ₹500. The fund has no lock-in period, but investors are warned not to invest in this or any other small-cap fund if they need to redeem their investment in less than seven years.

Frequently asked questions