Mutual Funds

Axis Equity fund: Buy

K Venkatasubramanian | Updated on August 03, 2014 Published on August 03, 2014

Despite being relatively young, the fund has beaten the Nifty consistently



Investors looking to weather volatile markets, while also wanting to generate benchmark-beating returns, can consider buying the units of Axis Equity.

The scheme is predominantly large-cap oriented, with exposure to mid-caps enhanced during broader-market bull runs.

In one- and three-year timeframes, the fund has outperformed its benchmark Nifty by about three percentage points.

Over the past three years, Axis Equity has delivered 15.9 per cent returns annually, which places it among the top quartile of funds in its category. Returns are higher than peers’ such as Tata Pure Equity, L&T Equity and Canara Robeco Large Cap+.

Though it has a track record of just over four years in existence, it has delivered quite well and compares favourably with top peers in terms of returns over this period. Investors can take the SIP (systematic investment plan) route to buy units of the fund, to average costs across market cycles.

A timeline of four-five years may be necessary to derive market-beating returns.

Portfolio and strategy

By taking higher exposure to safe debt instruments during falls and also generally managing a portfolio that favours defensives a bit more than cyclicals, Axis Equity has managed to ride the volatile phases in the market quite well. For instance, during volatile periods in 2011 and 2013, exposure to debt instruments was to the tune of over 15 per cent.

Axis Equity maintains a large-cap exposure with its top picks generally being from the Nifty basket. Mid-caps figure to the extent of 10-20 per cent of the portfolio depending on the market conditions. In recent months, the fund has increased stakes in mid-cap stocks, given their blistering performance.

Banks have always been favoured across market cycles. The banking sector accounts for over 30 per cent of Axis Equity’s portfolio.

Software and pharma are the other segments that figure among the fund’s top holdings.

Despite holding on to the two defensive segments, its calls have been on the right stocks and hence the scheme has generally not missed out on any prolonged rally.

In the last one year, some enhancement in cyclical segments has also been done. So, its investments in consumer non-durables have witnessed a reduction in portfolio weightage, while holdings in petroleum products and automobiles have been enhanced significantly. Apart from the top index names, companies such as Zee Entertainment, CMC, Federal Bank, DB Corp and Sanofi India figure among the fund’s key holdings.

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