Mutual Funds

Axis Long Term Equity: A good companion for the long haul

Anand Kalyanaraman | Updated on January 17, 2018 Published on July 09, 2016

Large-caps give stability and small-caps add spice to this fund’s performance



It’s never too early for your tax-saving investments. If you plan to deploy money in an equity linked savings scheme (ELSS) this fiscal, you can start now instead of waiting till February or March. Axis Long Term Equity is among the best choices in this category.

With an annualised return of nearly 28 per cent over the past three years and 20 per cent over the past five years, the fund ranks in the top quartile among peers. It has beaten its benchmark, S&P BSE 200, by a wide margin, with outperformance in the range of 10-13 percentage points over three to five years.

The fund is a very consistent winner — on a daily rolling basis, its annual returns have been better than the benchmark’s almost always.

Since its inception in late 2009, the fund has done well across market cycles, rallying strongly during upsides and containing downsides during weak phases of the market. For instance, while the benchmark has lost more than 3 per cent since the January 2015 highs, the fund has gained about 3 per cent.

Axis Long Term Equity maintains high exposure (96 to 98 per cent of the corpus) to equities most times, with the chunk — 75 to 85 per cent of the portfolio — in relatively stable large-cap stocks. Mid-cap and small-cap stocks that make up the rest help provide a kicker to returns during market rallies

. The fund has a growth investing strategy and does not mind paying a premium for quality companies.For instance, the fund’s top holdings HDFC Bank and Kotak Mahindra Bank are costlier than most peers but have consistently registered good growth.

Stock appreciation and healthy inflows have made Axis Long Term equity the largest in its category with corpus close to ₹9,000 crore.

This, combined with a buy-and-hold approach that reduces portfolio churn, has helped the fund keep its expense ratio low compared with most peers. In the last year, the fund added just two new stocks to its portfolio and exited three.

The fund’s picks in both large-caps and smaller stocks have mostly played out well in the long term.

For instance, stocks such as Bajaj Finance, Eicher Motors and Symphony have been multi-baggers over three to five years.

Timely exits from losers such as Tree House Education & Accessories also helped. The optimism of the fund manager (Jinesh Gopani) in the domestic growth story has manifested in private banks, finance companies and autos being the largest sector holdings.

PSU banks, though, have been a no-no, given the asset quality concerns. The fund also bets selectively on stocks in export-oriented sectors such as pharma and software as a hedge.

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