Axis Long-Term Equity: Trumps its benchmark comfortably

The fund churns sectors and stocks well, according to market conditions

Axis Long-Term Equity (Axis LTE) is a good bet among equity linked savings schemes (ELSS). Investments in this fund will have a lock-in of three years and fetch deduction under Sec 80C of the Income Tax Act up to ₹1.5 lakh. The fund is among the top quartile performers in the ELSS category, investing predominantly in large-cap stocks. Its consistently high returns have seen its corpus swell to about ₹17,000 crore now, which is almost double the size of its closest peer. Axis LTE has one of the lowest expense ratios among ELSS funds (excluding direct plans) at 1.77 per cent.

Performance and strategy

Launched at the end of 2009, the fund has comfortably outshined its benchmark — the BSE 200 TRI — be it in the bear market of 2011, the volatile markets of 2013 and 2015 or the rally of 2012, 2014 and 2017. The fund churns sectors and stocks well, according to market conditions. For instance, fresh out of the 2011 fall, the fund was high on consumer non-durables, a defensive space. But it quickly sensed the changing mood and latched on to cyclicals to participate in the 2012 rally. Besides, while it holds about 20 per cent in mid-caps during bull markets, it cuts this down to contain losses at other times.

 

 

The only time the fund ran out of luck was in 2016. The high equity holding of 96-98 per cent in its portfolio that year took a toll on the fund. Besides, at a time when pharma stocks took a sound beating, the fund continued to hold 11-12 per cent in this space until November 2016. It was only towards the fag end of the year that the fund cut down its pharma holdings by half. Since then, it has made amends. The overheated market conditions and corrections in recent times have seen Axis LTE reduce its equity holdings to 93-95 per cent in the last year or so.

Stock and sector choices

Axis LTE follows a growth-oriented strategy. It invests mostly in bluechips in the large-cap space, and does not mind paying a bit steeply for quality. Tata Consultancy Services, HDFC Bank, HDFC, Maruti Suzuki, Motherson Sumi, Eicher Motors, Avenue Supermarts and Bajaj Finance, are some such stocks. Considering that mid and small-caps are in the correction mode, the fund now holds less than 10 per cent in this space.

Banks and finance are usually the top sector choices. But otherwise, the sector preferences differ based on market conditions. Until well into 2017, the fund lowered its exposure to software stocks, considering the headwinds. But into this year, bettering prospects and a depreciating rupee have prompted the fund to up its stakes. Consumption sectors such as auto and, with it, auto ancillaries have also found favour with the fund. Some value buying is also visible in the pharma space.

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