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Axis Equity Fund – Slow and steady large cap fund.
Tue, Feb 16, 2016
Source : Khyati Shah, Citrus Interactive

Axis Equity Fund is an open ended large-cap oriented equity diversified fund. The fund seeks to achieve long term capital appreciation by investing in a diversified portfolio predominantly consisting of equity and equity related securities including derivatives. The fund was launched in January 2010 and is benchmarked against the Nifty 50 Index. The fund has an AUM of Rs. 1,971 crores as on December 31, 2015 which has gone up by 440 crores as compared to last year December 31, 2014 (Rs. 1,531 crores).

 

Fund Performance

Although the performance of the fund is in line with the benchmark, it has lagged its category average in YTD performance. Its performance since inception has been better than its benchmark by over 4.16 percentage points. The fund has outperformed its category average and benchmark in 6 months’ time frame.

Scheme Name

YTD

6 Months

1 Year

2 Years

5 Years

Since Inception

Axis Equity Fund

-5.09

-9.23

-9.77

17.33

11.24

10.27

Nifty 50 Index

-4.82

-11.36

-14.14

11.48

6.56

6.11

Category Average

-6.12

-10.32

-7.73

24.6

12.2

NA

Rank

41/165

47/161

100/158

117/149

74/137

NA

Figures are in % as on January 31, 2016; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

The fund has consistently outperformed its benchmark returns in all the last five calendar years. The performance of the fund in year 2013 was exceptional beating the benchmark and the category average by a wide margin and was also in the top quartile.

Scheme Name

2011

2012

2013

2014

2015

Axis Equity Fund

-22.55

31.73

13.49

40.85

-1.24

Nifty 50 Index

-24.62

27.7

6.76

31.39

-4.06

Category Average

-23.95

34.05

5.43

53.99

3.63

Rank

50/138

75/142

6/146

112/149

130/158

All figures in %

Risk Measures:  In terms of measures of risk such as standard deviation (average of the last three years) the fund has a lower level of risk compared to the category median whereas in terms of beta (average over last three years) the fund has a higher level of risk compared to the category median.

 

Standard Deviation

Beta

Axis Equity Fund

0.92

0.92

Category Median

0.95

0.89

 

Risk adjusted Returns: In terms Treynor ratio (measured over last three years) the fund has provided same risk-adjusted returns as the category median whereas in terms of Sharpe ratio (measured over last three years), the fund has provided lower risk-adjusted returns than the category median.

 

Treynor

Sharpe

Axis Equity Fund

0.06

0.06

Category Median

0.06

0.07

 

Portfolio Characteristics:

Sector Concentration:  The fund’s concentration in the top 3, 5 and 10 sectors is higher than the category median highlighting higher risk of the fund.

 

Top 3

Top 5

Top 10

Axis Equity Fund

38.67

50.91

73.23

Category Median

36.43

49.44

70.09

 

Company Concentration: The concentration of funds in top 3, 5 and 10 companies in its portfolio is higher than the category median highlighting higher risk of the fund.

 

Top 3

Top 5

Top 10

Axis Equity Fund

20.57

30.14

49.85

Category Median

18.69

27.5

44.45

Higher Sector and Company Concentration signifies the high risk profile of the fund.

Number of equity holdings: The fund currently holds 39 stocks in its portfolio (December 31, 2015), which is lower than the median stock count for the diversified-equity category, which currently stands at 45. Thus, based on equity count the fund runs a less diversified portfolio compared to its peer set. This seems to the characteristics of the Fund as over the past five years the fund has always had a diversified portfolio with the number of equity holdings over this period averaging 40.

Cash allocation: The average cash allocation for last five years is 4.98 per cent. Its maximum allocation to cash over last two years was 6.12 per cent in January 2014 and lowest was -0.47 per cent in November 2014. In 2015 it had an average cash allocation of 2.57 per cent. However, its cash allocation at the end of December 2015 was 2.92 per cent.

Portfolio Insights: The top 5 sectors in the portfolio had an allocation of 50.91% which is lower than the category average of 48.36%. The top 5 sectors include Private sector banks, IT - Software, Pharmaceuticals, Automobiles and TV Broadcasting & Software Production.

The fund’s exposure to cyclical stocks currently is 54.64% followed by Services with 25.96% and Defensives with 13.05%. The Top five holdings are HDFC Bank Ltd., Infosys Ltd., Zee Entertainment Enterprises Ltd., Housing Development Finance Corporation Ltd. and Reliance Industries Ltd.

In the last six months the fund has bought stocks of Mahindra Holidays & Resorts India Ltd. whereas stocks of Thermax Ltd., CMC Ltd, SKF India Ltd., Motherson Sumi Systems Ltd. and Idea Cellular Ltd. have been dropped from the portfolio.

There are 27 large cap stocks in the portfolio with a total weight of over 78% and 12 mid cap stocks with a total weight of about 16%

 

Process

Axis Equity Fund is an open-end diversified equity fund scheme having asset allocation of 80-100% in equities and upto 20% in Debt/Money Market instruments. As per the Scheme Information Document, the fund will follow a bottom up approach of investing in stocks having appreciation potential based on their fair value/intrinsic worth. The fund will be an actively managed portfolio of stocks (across market capitalization) consisting of strong growth companies with sustainable business models. The fund’s investment strategy allows the flexibility to invest across the market capitalization (i.e. large, mid and small cap companies) and in all industries / sectors. The fund’s performance will completely depend upon the view of the fund manager and the research process followed by the fund management team. Also the Investment Strategy is expected to be a function of extensive research and based on data and reasoning, rather than current fashion and emotion.

The fund’s expense ratio is 1.95% which is lower than the category average of 2.33%. Like most equity funds the fund has an exit load of 1 per cent on or before one year from the date of investment. Minimum investment in the fund is Rs 5,000.

 

Fund Manager

Mr. Pankaj Murarka serves as the Head of Equity at Axis Asset Management Company Limited, and has been its Senior Fund Manager of Equity there since November 3, 2009. Mr. Pankaj Murarka has over 13 years of experience in the equity fund management.  He previously served as a Principal Officer at Pipal Capital Management Private Limited from April 2009 till November 2009. He was a Portfolio Manager at DSP Merrill Lynch Ltd. from June 2006 to March 2009. He was the Head of Research and a Fund Manager at Rare Enterprises from June 2004 till June 2006. He was involved in equity sales at Motilal Oswal Securities Ltd. from April 2003 to May 2004. Mr. Murarka is a Chartered Accountant and holds a B.Com degree. He also manages Axis Midcap Fund.

 

View

Though the Scheme Objective allows the fund to invest across sectors, it has chosen to be a large cap oriented fund. 2015 has been a year that has rewarded mid caps more than large caps and we have seen that reflected in the performance of this fund. To its credit, the Axis Equity Fund has outperformed its benchmark index in all periods except in the limited one month period of Jan 2016. If you look at its portfolio closely you will find that stocks such as Mahindra Holidays, Ramco System and Voltas have been the stellar performers in 2015. All these stocks have market caps below Rs 10,000 crs.  Therefore this fund will be suitable for those investors who want to be primarily in a large cap fund and do not want too much alpha from the fund manager.

 

To read the previous Citrus Analysis of Axis Equity Fund Click Here

 
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