Mr. Janakiraman Rengaraju

Portfolio Manager - Equity, Franklin Templeton Mutual Fund.

Janakiraman Rengaraju is vice president and portfolio manager for Templeton Global Investments. He manages several equity strategies, including Franklin India Prima Fund, Franklin India Opportunities Fund, and Franklin India Smaller Companies Fund. He is also co-portfolio manager for Franklin India Equity Advantage Fund, Franklin India Equity Fund, and Franklin India Taxshield. Mr. Rengaraju has been in the investment management Industry since 1997. He started his career with Franklin Templeton in 2007. Prior to joining Franklin Templeton he was managing the investment corpus of Indian Syntans Group, a Chennai based privately held group of companies. Before this he worked for UTI Securities, Mumbai. Mr. Rengaraju earned a Post Graduate Diploma in Management from the Indian Institute of Management, Bangalore, in 1995 and a Bachelor of Engineering from the Government College of Technology, Coimbatore, in 1992. He is also a Chartered Financial Analyst (CFA) charterholder

Please note we have published the answers as it is received from the Fund Manager of Franklin Templeton Mutual Fund.

Q1. With markets recovering despite a mixed global macro environment, do you believe the worst of the recent headwinds is behind us? What indicators would you watch to distinguish a durable trend change from a temporary relief rally?

Ans: The immediate pressure on markets appears to have eased, though it may be premature to conclude that all headwinds are behind us. Moderating tensions in West Asia and Brent crude returning closer to pre-conflict levels have reduced near-term risks to inflation, the currency and India’s external position.

Valuations have also become more reasonable. MSCI India’s premium to MSCI Emerging Markets narrowed to 75%, from 119% in 2025 and 164% in 2024. On a price-to-book basis, the premium declined from 164% in August 2024 to around 37%, below its 10-year average of 93%.

However, valuations alone cannot sustain a recovery. India’s earnings are closely linked to domestic growth, making broad-based profit growth and actual earnings delivery critical. The weak start to the monsoon also warrants monitoring, although healthy reservoir levels offer some cushion.

• Earnings: Profit growth should broaden across sectors and earnings revisions should stabilise. Consensus currently indicates an earnings trajectory of ~ 12% to 14% CAGR over FY27–FY28.

• Domestic demand: Credit growth, automobile sales, power consumption, cement volumes, rural wages and private capital expenditure should remain resilient.

• Macro stability: Crude oil, inflation, the monsoon and the rupee will influence consumption, corporate margins and investor confidence.

• Market breadth and flows: Domestic institutions invested USD 8.7 billion in June 2026, offsetting FPI outflows of USD 3 billion. With global investors still underweight India, stronger earnings visibility and lower currency volatility could support a gradual return of foreign flows.

Overall, while macro risks have not fully receded, the combination of more reasonable valuations, gradual earnings recovery and sector-specific opportunities suggests a healthier medium-term outlook for Indian equities.

Q2. Investors often focus on buying good businesses, but even great companies can become poor investments if purchased at excessive valuations. How do you strike the balance between business quality and price while making investment decisions?

Ans: Quality and valuation are two parts of the same investment decision. A strong company can still produce a weak investment outcome if its market price already assumes near-perfect execution.

We assess quality through the company’s growth runway, competitive position, earnings visibility, governance, management capability, cash-flow generation and return on capital. We also examine whether the business can sustain its advantages and adapt to changes in technology, regulation and competition.

We then estimate intrinsic value using methods appropriate to the business and test the assumptions under base, upside and downside scenarios. A durable and predictable company may justify a higher valuation than a cyclical business, but quality does not justify an unlimited price. Equally, a low valuation is not attractive if governance is weak, capital allocation is poor or the business is structurally deteriorating.

The objective is to invest in businesses capable of compounding value over time, but only at a price that provides a reasonable margin of safety. This may require waiting for a better entry point or reducing exposure when valuation moves materially ahead of fundamentals.

Q3. Investors and even distributors often judge funds and markets on point-to-point returns, which can look dramatically different depending on the start and end date chosen. Why do rolling returns offer a fairer picture of both fund performance and the equity investing experience, and how should investors use them to set realistic expectations?

Ans: Point-to-point returns capture only one investment period and can be significantly influenced by the dates selected. Rolling returns offer a more balanced assessment by measuring performance across multiple entry points and market cycles. For example, five-year rolling returns evaluate every available five-year holding period rather than a single start and end date.

This helps investors assess return consistency, the range of outcomes, downside experience and performance relative to the appropriate benchmark. For long-term equity funds, five-year or longer rolling periods are generally more meaningful.

Investors should focus on the median return, dispersion of outcomes and benchmark-relative consistency rather than the best historical result. Rolling returns cannot predict future performance, but they provide a more realistic basis for viewing equity returns as a range of possible outcomes rather than a fixed or assured number.

Q4. Wealth in equities is often attributed to picking the right fund or timing the right entry, yet history suggests the holding period matters far more than either. From your experience across market cycles, what truly separates investors who compound wealth over 15–20 years from those who don't?

Ans: The main difference is generally not the ability to forecast market turning points, but the discipline to follow a suitable investment plan across multiple market cycles. This means starting early, investing consistently, increasing contributions as income grows and remaining committed during market corrections.

Equally important is maintaining an asset allocation aligned with one’s need, risk appetite, liquidity needs and investment horizon. For needs more than five years away, diversified equity categories such as flexi-cap and multi-cap funds can provide exposure across market capitalisations and sectors, while the SIP route can help investors use market volatility to accumulate more units at lower prices.

Starting early is equally important. To target ₹5 crore by age 60, assuming a 12% annualised return, an investor beginning at age 30 would need to invest approximately ₹14,165 per month. Delaying the start by five years would increase the required monthly investment to around ₹26,350.

Fund selection and entry valuation still matter, but long-term wealth building is often shaped more by time, rising contributions and the ability to avoid emotionally driven exits. The greatest advantage is not one perfectly timed decision but allowing a disciplined investment plan sufficient time to compound.

Q5. Every fund manager follows a distinct investment style, and every style goes through phases of being out of favour. Assume if your scheme is currently underperforming, what would be your advice to investors? How should they decide whether to remain patient or consider switching?

Ans: Underperformance should be reviewed, but recent returns alone should not drive an exit. Investors should first determine whether the weakness reflects a temporary phase for the fund’s investment style or a more fundamental concern.

Patience may be appropriate if the fund remains true to its mandate, the investment team and process are stable, portfolio holdings continue to be supported by fundamentals, and the risk profile remains consistent with the stated strategy. For instance, a quality- or valuation-oriented fund may temporarily lag when markets favour momentum or highly valued themes.

The assessment period should also match the fund’s investment horizon. A few quarters may be insufficient to judge a long-term equity strategy. Performance should be evaluated against the appropriate benchmark and comparable peers, preferably across a broader market cycle.

A switch may be considered if there is persistent style drift, a material change in the investment team or process, deterioration in portfolio quality, unexplained risk-taking, deviation from the scheme mandate, or sustained underperformance that cannot be reasonably linked to the fund’s stated style.

The key is to distinguish between temporary underperformance within a credible investment process and evidence that the original reason for investing in the fund has weakened.

Q6. SEBI data shows the vast majority of retail F&O traders lose money, yet derivatives volumes keep rising while the same investors hesitate to commit to long-term SIPs. What explains this paradox, and how can the discipline of investing be made as compelling as the excitement of trading?

Ans: The paradox is largely behavioural. Derivatives offer instant feedback, frequent opportunities and large market exposure for a relatively small upfront amount. This combination can make trading feel more rewarding than the gradual progress of long-term investing, even when the probability of success is low. SEBI’s study found that 93% of individual equity F&O traders incurred losses between FY22 and FY24, with aggregate losses exceeding ₹1.8 lakh crore.

Trading activity has nevertheless continued to expand. In 1QFY27, the average daily number of options contracts on BSE increased 91% year-on-year to 156 million, while MCX recorded a 248% rise to 13.8 million contracts. Easier access, leverage, overconfidence and the urge to recover earlier losses can keep participation elevated despite poor aggregate outcomes.

The SIP journey presents a more constructive picture. Aggregate SIP flows grew approximately sevenfold at a 26% CAGR between FY17 and FY26. As of May 2026, total SIP accounts stood at 10.47 crore, up 15.6% year-on-year, while SIP assets increased 17% to ₹17.12 lakh crore.

The industry also registered 54.16 lakh new SIPs during May, although registrations were 8% lower year-on-year. Importantly, the share of SIP assets held for more than five years increased to 31% in March 2026 from 30% a year earlier, indicating a gradual improvement in holding behaviour. Monthly SIP contributions subsequently reached ₹31,781 crore in June 2026.

To make investing more compelling, its progress must be made visible. Linking SIPs to specific needs, tracking milestones, automating contributions and periodically increasing the investment amount can provide a stronger sense of achievement.

Investing need not replicate the excitement of trading. Its appeal should come from turning regular contributions into measurable progress towards long-term financial needs.

Source: Internal Research
Mutual fund investments are subject to market risks, read all scheme-related documents carefully.