debt outlook - may 2016...portfolio data as on 31st may 2016. disclaimer: past performance may or...

FIXED INCOME OUTLOOK

JUNE 2016

Indian bond markets were little changed for the month of May after witnessing a large post-budget rally in March and April. Benchmark 10 year ended the month of May at 7.5%.

April CPI Inflation surprised negatively as inflation moved up to 5.4% from 4.8% in the previous month (mainly on account of food inflation). Core CPI nudged up as well to 4.9%. Broad inflation trajectory remains within the RBI’s comfort zone, and further cushion on inflation should come as food inflation moderates. RBI is expected to leave rates unchanged in its upcoming policy review in June.

Following the announcement of its new liquidity framework, the RBI has initiated the process of adding system liquidity through open market operations (Approximately INR 40000 crores. of OMO’s done in the month of May). As a result system liquidity has improved significantly.

Market yields have not reacted to the improvement in liquidity as this has been balanced with concerns on US rate hike and rising crude as well as inflation uncertainties before the onset of monsoon.

The US Fed is widely expected to raise rates in its June meeting even as US and global growth remains tepid. Global bond yields continue to trade at the lower end of their range of the last 6 months.

India’s external accounts are likely to remain comfortable even as the BoP surplus has narrowed in the absence of large portfolio inflows. India has seen significant addition to its foreign reserves over the last 2 years which provides it with high level of external resilience. The Rupee after a period of disproportionate strength in 2014, has been broadly tracking other Asian currencies in the last few months.

India’s relative macro outperformance continues in a difficult global environment. Q4 GDP growth came at 7.9% which was better than the Q3 number of 7.2%. Growth was led by consumption while investment remained a drag. The gradual cyclical recovery should push GDP growth further over the next year. However given the output gap that exists, we do not expect the growth revival to have any immediate pressure on inflation.

The yield curve continues to show a large positive slope relative to the flat curve that existed 1 year ago. The steepness is presenting an opportunity in the 3-5 year corporate bond segment. While further policy rate cuts are likely limited, better transmission and changed liquidity stance, should lead to lower market rates over the next 12 months.

6.5%

Repo : Last 1 year

7.5%

CPI Inflation : Last 1 year

4.9%

5.4%

10 year G-Sec yield

7.5%

10 yr G-Sec : Last 1 year

7.6%

7.5%

• While further policy rate cuts are likely limited, better transmission and changed liquidity stance, should lead to lower market rates over the next 12 months.

• Investors with risk appetite should look to add duration in their bond portfolios while those with lower risk profile may look for shorter duration funds.

QUICK take

AXIS DYNAMIC BOND FUND• The fund is positioned as an actively managed bond fund which invests in the

best ideas at any time and can move across the yield curve.

• Both duration and asset allocation (G-sec v/s corporate bonds) are actively managed.

• Active duration management over the last few months as the markets turned volatile has created significant alpha for the fund. Currently the fund’s duration is 4.7 yrs.

Yield to Maturity *

8.00%

Primary Asset Class^

Modified Duration

4.7

Average Maturity

7.7years years

Across al l f ixed income instruments

Why Invest?

“ G o A n y w h e r e ” actively managed Fund following a Best Ideas approach and can move across the yield curve

Yield to Maturity *

8.08%


Modified Duration

4.3

Average Maturity

6.7 Why Invest?

Active Management within a duration range suitable for a falling interest rate environment

years years

Primarily long dated Corporate Bonds & G-Sec

AXIS INCOME FUND• The fund is positioned to benefit from its core allocation in corporate bonds in the

3-5 year space. Dynamic duration management is carried out using G-sec allocation (currently around 27 %)

• The portfolio stance is expected to benefit from the change in liquidity regime of RBI over next 12 months and transmission of previous rate cuts. The fund focuses on maintaining a high quality bias in its corporate bond portfolio.

• The portfolio design should help generate stable returns while bringing down volatility relative to a longer duration fund. Currently, the fund has duration of around 4.3 years.

AXIS FIXED INCOME OPPORTUNITIES FUND• The fund is positioned to capture opportunities across credit and duration space

while monitoring risk by controlling the overall portfolio duration.

• The current duration of the fund is 1.6 years. The focus of the fund is to capture the compression in 3-5 year corporate bonds and also have a higher accrual.

• The portfolio allocation continues to be in 3-5 year corporate bonds and money market instruments.

• The portfolio stance is expected to benefit from the compression in spreads in the short to medium term segment of the curve.

Yield to Maturity *

8.31%


Modified Duration

1.6

Average Maturity

1.8years years

Across al l f ixed income instruments s u c h t h a t t h e portfolio duration is within 3 yrs

Why Invest?

T o c a p t u r e opportunities across accrual, credit and duration space.Monitors risk by c o n t r o l l i n g t h e overall portfolio duration

Yield to Maturity *

7.94%


Modified Duration

1.7

Average Maturity

2.0years years

Short Term Debt & M o n e y M a r k e t Instruments

AXIS SHORT TERM FUND• The fund follows a high quality & low-risk strategy endeavoring to generate

stable returns. It aims to capture opportunities in the yield curve spreads in the short duration segment.

• The fund tracks corporate bond v/s short dated G -sec spreads closely while making its allocations. The portfolio allocation continues to be in 3-5 year corporate bonds and money market instruments.

• The portfolio stance is expected to benefit from the compression in spreads in the short to medium term segment of the curve.

• The corporate bonds exposure remains in highly rated instruments.

• The current duration of the fund is 1.7 years.

Why Invest?

Actively Managed Short Duration Fund with Daily Liquidity e n d e a v o r s t o generate s tab le returns by following a high quality & low-risk strategy

* The yield to maturity given above is based on the portfolio of funds as on May 31, 2016. This should not be taken as an indication of the returns that maybe generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The calculations are based on the invested corpus of the debt portfolio. For instruments with put/call option, the put/call date has been taken as the maturity date.

^Note: Allocation & duration is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets.

AT A GLANCE

FIXED INCOME OUTLOOK

JUNE 2016

Axis Fixed Income Opportunities Fund

Across all fixed income

instruments such that

the portfolio duration is

within 3 yrs

1.8 years

1.6 years

8.31%

36%

63%

1%

82%

0.3%

To capture

opportunities across

accrual, credit and

duration space

If redeemed/ switched out within 12 months f rom the da te o f allotment: • For 30% of investment : Nil • For remaining investment : 1.5%. If redeemed/ switched out within 1 year, 1% if redeemed/ switched out after 1 year and upto 2 years, 0.5% if redeemed/ switched out after 2 years and upto 3 years f rom the da te o f allotment (w.e.f. 14th December 2015)

Axis Short Term Fund

NIL

(wef 28th Aug 2015)

Actively Managed

Short Duration Fund

with Daily Liquidity

Short Term Debt &

Money Market

Instruments

2 years

1.7 years

7.94%

27%

72%

1%

Axis Constant Maturity 10 Year

Fund

NIL

To target a specific

duration

G-Sec

9.7 years

6.1 years

7.58%

-

100%

-

100%

-

Axis Banking Debt Fund

NIL

Short term fund with

high quality portfolio

Primarily in Bank CDs

1 year

1 year

7.47%

81%

19%

-

100%

-

Axis Liquid Fund

NIL

Cash Management

Money Market

Instruments

<91 days

34 days

34 days

7.51%

100%

-

-

100%

Axis Dynamic Bond Fund

Across all fixed

income instruments

7.7 years

4.7 years

8.00%

20%

46%

33%

95%

-

“Go Anywhere” Fund

following a Best

Ideas Approach

I f r e d e e m e d / switched out within 12 months from the date of allotment: • - F o r 1 0 % o f investment : Nil. • F o r r e m a i n i n g investment : 1%. If redeemed/switched out after 12 months from the date of allotment: Nil

Axis Income Fund

Primarily long dated

Corporate Bonds &

G-Sec

6.7 years

4.3 years

8.08%

21%

53%

27%

92%

-

Active Management

within a duration

range suitable for a

falling interest rate

environment

NIL

Axis Treasury Advantage Fund

Money Market &

Short Term Debt

Instruments

7.87%

63%

37%

-

90%

-

For spare cash in your

Bank Account

NIL

$AAA & Equivalent includes AAA/A1+-rated papers. ̂ Note: Allocation & duration is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets. *The yield to maturity given above is based on the portfolio of funds as on May 31, 2016. This should not be taken as an indication of the returns that may be generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The calculations are based on the invested corpus.

Money Market Instruments

Corporate Bond

G-Sec

Sovereign/ AAA & $equivalent

AA+

7%

9%-

-

-

-

--

1%1%

7%

5%

4% 4%

AA

AA-

Why Invest?


Average Maturity

Modified Duration

Yield to Maturity*

Asset Mix

Rating Mix

Exit Load

Load Structure

1%- --- --1%A+

A 1% --- 1%

100%

-

--

-

179 days

169 days

stPortfolio data as on 31 May 2016.

Disclaimer: Past performance may or may not be sustained in the future. Sector(s) / Stock(s) / Issuer(s) mentioned above are for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the securities the mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). This document should not be construed as research report.

Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to ̀ 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC) Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

Source of data: Bloomberg, ACEMF

Axis Short Term Fund (an open-ended

debt scheme)

This product is suitable for investors who are seeking*:

• Regular income while maintaining liquidity over short to medium term

• Investment in debt and money market instruments

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Riskometer

Investors understand that their principal will be at moderately low risk

LOW HIGH

Moderate ModeratelyHighModerately

Low

HighLo

w

Axis Treasury Advantage Fund (an open-ended debt scheme)


• Regular income over short term



Riskometer


LOW HIGH


Low

HighLo

w

Axis Dynamic Bond Fund (an open-

ended debt scheme)


• Optimal returns over medium to long term

• To generate stable returns while maintaining liquidity through active management of a portfolio of debt and money market instruments


Riskometer

Investors understand that their principal will be at moderate risk

LOW HIGH


Low

HighLo

w

Axis Constant Maturity 10 Year Fund (an open-ended gilt scheme)


• credit risk free returns over medium to long term

• Investment mainly in Government securities to generate returns similar to that of 10 year government bonds


Riskometer


LOW HIGH


Low

HighLo

w

Axis Income Fund (an open-ended debt fund)


• Optimal returns over medium term

• Investment in diversified portfolio of high quality debt and money market securities to generate optimal risk adjusted returns while maintaining liquidity


Riskometer


LOW HIGH


Low

HighLo

w

Axis Liquid Fund (an open-ended liquid

scheme)


• Regular income over short term



Riskometer

Investors understand that their principal will be at low risk

LOW HIGH


Low

HighLo

w

Axis Fixed Income Opportunities Fund (an open-ended debt scheme)


• Stable returns in the short to medium term

• Investment in debt and money market instruments across the yield curve and credit spectrum


Riskometer


LOW HIGH


Low

HighLo

w

Axis Banking Debt Fund (an open-ended

debt scheme)


• Regular income over short to medium term

• Investment in debt and money market instruments issued by banks


Riskometer


LOW HIGH


Low

HighLo

w

debt outlook - may 2016...portfolio data as on 31st may 2016. disclaimer: past performance may or...

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