indian equities - think long term...with a 3 year lock in offers tax benefit under section 80c of...

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INDIAN EQUITIES - THINK LONG TERM

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• India offers structural

opportunity for foreign

investors

• Potential for sustained fast

growth

• Inflation sharply lower

• Twin deficits have fallen

• Currency stabilizing

• Economic growth is

recovering

• Recovery still modest and

uneven – will take time

• Investment cycle revival will

help sustain growth

• Government focusing on

pushing growth-enhancing

policies

Different pieces falling in place

1. Structural

advantages

2. Macro

stability

3. Growth

revival

4. Policy

movement

3

Steps taken so far

Near term agenda

• Liberalized FDI – railways, defence,

construction, insurance

• Energy sector reforms – diesel, gas

• Mining sector reforms – Coal, others

• Infrastructure push – Ease of land acquisition,

speeding up

project clearances

• Fiscal consolidation

• Financial inclusion – bank account push

• Initial move on labour reforms

• Tax reform – GST, administrative steps

• Continued focus on Infrastructure – high

speed rail, freight corridor

• Subsidy rationalization – direct cash

transfers

• Power sector push – revival of stuck

projects, renewables

• Move towards E-Governance and

transparency

Source of data: Bloomberg

Government policy action supportive for higher growth

Budget 2015-16: Further push to structural reforms

Source of data: Budget Document 2015-16

Monetary policy overhaul

• Use of an inflation target by RBI while setting monetary policy

A true federation

• Increase in the funds available and the spending flexibility at the state level

• This will lead to much higher efficiency in outlays and spending for government programmes

Higher Tax to GDP

• Implementation of GST

• Looking to bring down direct tax rates to improve competitiveness and hence promote investments

Push for infrastructure and Capital expenditure

Encouraging savings rate and improving subsidy architecture

• Jan-Dhan architecture to create a social security network

• Incentivized savings for pension and monetization of gold held by households

5

Source: Bloomberg

Brent Crude Oil prices (USD) S&P GS Commodity Index (USD)

Major sell-off in global commodities especially oil

Low commodity prices helping current account deficit to ease

40

50

60

70

80

90

100

110

120

Aug

-13

No

v-1

3

Feb-1

4

Ma

y-1

4

Aug

-14

No

v-1

4

Feb-1

5

350

400

450

500

550

600

650

Se

p-1

3

De

c-1

3

Ma

r-14

Jun

-14

Se

p-1

4

De

c-1

4

Ma

r-15

6 Source of data: Bloomberg, IMF WEO, IMF Forecasts for GDP growth

Favorable trend in growth, Inflation, currency, external account, fiscal balances

2014F -

5.4%

2015F -

6.4%

Quarterly GDP Growth Rate Can go back to 8%

with structural

reforms

0%

2%

4%

6%

8%

10%

12%

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13

10 year average – 7.5% (2004-2013)

20 year average – 6.8% (1994-2013)

Growth is reviving but recovery still uneven

7 Source of data: Bloomberg. P/E – Price to Earnings Ratio, P/B – Price to Book Ratio

CNX Nifty Forward P/E CNX Nifty Forward P/B

Valuations reasonable despite cyclically low margins

7

9

11

13

15

17

19

21

23

Ma

r-0

6

Ma

r-0

7

Ma

r-0

8

Ma

r-0

9

Ma

r-1

0

Ma

r-1

1

Ma

r-1

2

Ma

r-1

3

Ma

r-1

4

Ma

r-1

50

1

2

3

4

5

6

Ma

r-0

6

Ma

r-0

7

Ma

r-0

8

Ma

r-0

9

Ma

r-1

0

Ma

r-1

1

Ma

r-1

2

Ma

r-1

3

Ma

r-1

4

Ma

r-1

5

8 Source of data: CMIE, J.P. Morgan, IIFL Research,

Earnings growth Corporate Profits to Nominal GDP (%)

0%

1%

2%

3%

4%

5%

6%

FY

00

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14-20%

-10%

0%

10%

20%

30%

40%

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15E

FY16E

Profits can get a big boost from growth revival

9 Source of data: NSE

Earnings tend to be cyclical linked to economy

0

50

100

150

200

250

300

350

400

450

Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14

Nifty Earnings Trend (Jan 1999 – Mar 2015)

1999-2002

Earnings

Growth

-1% pa

(-3.8% absolute)

Nifty Returns

5.4% pa (23.5% bsolute)

2003-2007

Earnings Growth

+24.7% pa

(+201.5% absolute)

Nifty Returns

41.0% pa

(458.5% absolute)

2008-2015

Earnings Growth

+7.4% pa

(+68.3% absolute)

Nifty Returns

4.6% pa

(38.2% absolute)

Quality companies with high growth can deliver outsized returns

Note: This is historical data & is given for illustration only. No returns are being indicated. The fund manager may or may not invest in the said stocks. Past

performance may or may not be sustained in future.

Earnings growth is for the period FY 2004 to FY 2014, Source of data: Bloomberg, IIFL Research

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 stock mentioned, from time to time. Investors are requested to consult their financial, tax and

other advisors before taking any investment decision(s).

Earnings Growth Share Performance

Asian Paints Ltd. 21.5% 37.1%

Kotak Mahindra Bank Ltd. 30.6% 36.4%

Lupin Ltd. 35.2% 35.5%

Sun Pharmaceutical Industries Ltd. 23.0% 32.0%

Axis Bank Ltd. 33.9% 29.8%

Divi's Laboratories Ltd. 28.2% 28.9%

Nestle India Ltd. 16.1% 27.0%

Bosch Ltd. 9.0% 26.1%

Cummins India Ltd. 15.9% 25.9%

Colgate-Palmolive India Ltd. 16.9% 25.8%

performers of BSE 100 over 10 years

Source: Bloomberg, Data from Dec'80 - Dec'14, Returns are compounded annualized. Data based on yearly rolling

26% of the

times negative

13% of the

times negative

10% of the

times negative Never negative

Never negative

Rolling returns based on Sensex (1980 - 2014)

22% 17% 17% 17% 15%

1 year 3 year 5 year 10 year 15 year

Benefits of long term investments

12

Equity Funds Update

13

Growth biased - focusing on sustainable growth

Look for quality businesses

Aim to deliver superior risk adjusted returns

High conviction investors

Key pillars of Axis approach

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Our strategy relies on bottom up selection of quality companies that can deliver

sustainable growth

Variation in top and bottom stocks over the last 10 years

Source: Bloomberg, Past performance may or may not be sustained in future.

% CAGR (CY 04-14)

BSE 100 index 15.0

Top quartile 26.2

Bottom quartile (3.6)

Stock returns vary widely, high risk not equal to high return

Weak companies have destroyed

significant investor wealth

We offer a tight basket of clearly positioned equity funds

Axis Long

Term Equity

Fund

Axis Midcap

Fund

Axis Equity

Fund

Axis Focused

25 Fund

Axis Small Cap Fund

Large Cap: 50 - 100%

Mid Cap: Max 50%

Larger Mid caps

>90% in top 200 companies by

market cap

Large Cap: 70 - 100%

Mid Cap: 0 - 30%

Active Risk

Active

Re

turn

s

Small caps

Note: Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the

equity markets. Upto 31st Jan 2015, large caps defined as companies having a market cap greater than equal to Rs. 10,000 crores. Midcaps defined as

companies having a market cap less than Rs. 10,000 crores but greater than Rs. 1,000 crores. Since 1st Feb 2015, Mid-cap companies are defined to be

those companies with a market cap less than or equal to the largest market cap of BSE Mid-cap Index (currently 17495 crs) & greater than or equal to the

smallest market cap of the BSE Mid-Cap Index (currently 1299 crs), companies with market cap greater than 17495 crs are large cap companies and

companies with market cap less than 1299 crs are small cap companies. The range will be monitored on quarterly basis based on the average of last 4

quarters. Type of Scheme (Axis Long Term Equity Fund): Open-ended Equity-Linked Savings Scheme with a 3 year lock in. The bubbles in the chart are

proportionate to their sizes respectively.

Axis Equity Fund: Positioning

1

Large cap biased (70-100%)* with

midcap allocations (0-30%)*

Makes allocation to attractive mid cap ideas on a

bottom up basis

2

Risk management embedded in the

investment process

Relatively liquid portfolio

Targets volatility below benchmark (Nifty)

Pure bottom up stock

picking focusing on

fundamentals

Maintains a core portfolio of quality

businesses with secular growth

prospects

Takes tactical positions in quality

cyclicals linked to fund manager

views of cyclical factors and

market positioning

3

Note: Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view

of the equity markets. *Upto 31st Jan 2015, large caps defined as companies having a market cap greater than equal to Rs. 10,000 crores.

Midcaps defined as companies having a market cap less than Rs. 10,000 crores but greater than Rs. 1,000 crores. Since 1st Feb 2015, Mid-cap

companies are defined to be those companies with a market cap less than or equal to the largest market cap of BSE Mid-cap Index (currently

17495 crs) & greater than or equal to the smallest market cap of the BSE Mid-Cap Index (currently 1299 crs), companies with market cap

greater than 17495 crs are lareg cap companies. The range will be monitored on quarterly basis based on the average of last 4 quarters

What do we mean by quality businesses?

Strong competitive

positioning

Credible

management team

Sustainable Growth

Potential

Cash flow generating

with sound balance

sheet

Risk Management is an integral part of the investment process

Source: ACEMF, All numbers based on last 3 years data

Outperformed benchmark

12 out 14 months when

benchmark was negative

Average monthly

outperformance: 0.9%

Standard

Deviation:

13.8% Vs. 15.2% of

benchmark Max Drawdown:

-21.8% Vs. -23.3% of

benchmark

0

Lower volatility

Reduced drawdown

Out-performance

during market falls

Portfolio & Risk Parameters (Mar’15)

Std Dev (%) 13.8

Std Dev of Benchmark (%) 15.2

Tracking Error 4.3

Information Ratio 1.5

Beta 0.87

Risk parameters (3 years) Top 5 sector holdings

Top 10 stocks Current market cap split (% NAV)

*Note: Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of

the equity markets. 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 stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment

decision(s).

7.9% 7.6% 6.1%

5.1% 4.9% 4.1% 4.0% 3.8% 3.5% 2.9%

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Consistently outperformed benchmark

NAV Movement

Axis long term equity Fund: Positioning

1

2

3

Open-ended Equity-Linked Savings Scheme

with a 3 year lock in

Offers tax benefit under section 80C of the Income Tax Act, 1961

Invests in quality

businesses for the long term

through bottom up stock picking

3 year lock-in eliminates near term

pressure on stock selection

Can support quality businesses

through their market cycle Invests across market cap*

Large caps around 50-100% and

midcaps up to 50%

Note: Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view

of the equity markets. *Upto 31st Jan 2015, large caps defined as companies having a market cap greater than equal to Rs. 10,000 crores.

Midcaps defined as companies having a market cap less than Rs. 10,000 crores but greater than Rs. 1,000 crores. Since 1st Feb 2015, Mid-cap

companies are defined to be those companies with a market cap less than or equal to the largest market cap of BSE Mid-cap Index (currently

17495 crs) & greater than or equal to the smallest market cap of the BSE Mid-Cap Index (currently 1299 crs), companies with market cap

greater than 17495 crs are lareg cap companies. The range will be monitored on quarterly basis based on the average of last 4 quarters

What do we look for?

Sound management

pedigree with a track

record to manage

business in all

economic cycles

High sustainable

growth & superior

return metrics

Superior and

scalable business

model

Avoid highly cyclical

and highly regulated

sectors

Focus on bottom up stock picking of stocks which has sound business models,

pricing power, quality management and have consistently created long term wealth

for its shareholders


Standard Deviation (%) 13.7


Tracking Error 6.2


Beta 0.78

* Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the

equity markets. 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 stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment

decision(s).



8.3% 6.5% 6.3% 5.6% 4.9%

4.0% 4.0% 3.6% 3.6% 3.6%

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NAV Movement

*Note: Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the equity

markets. Mid-cap companies are defined to be those companies with a market cap less than or equal to the largest market cap of BSE Mid-cap Index

(currently 17495 crs) & greater than or equal to the smallest market cap of the BSE Mid-Cap Index (currently 1299 crs). The range of capitalization will be

monitored on an annual basis & will be an average of the previous 4 quarters. Annual here stands for 31st December of the respective year. Source:

Bloomberg

Invests at least 75%

in mid cap companies

Focused on emerging

sectors/businesses that have potential to deliver high growth

Nurtures a mix of value & growth

companies through their business

cycles

Tactically exploits opportunities by

investing in good businesses

undergoing significant events

Risk management embedded in the investment process

Follows a strategy of combining growth potential of mid cap

companies with the track record of larger companies

Investment in larger mid caps help to reduce the business &

price risk of mid cap companies

Axis Midcap Fund: Positioning

1

2

3

Innovative & entrepreneurial yet with experienced management

Market leaders in emerging industries or higher growth companies in established businesses

In the process of establishing their track records

In the growth phase of their life cycle

What do we look for in Midcaps?


* Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the

fund manager’s view of the equity markets. 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 stock mentioned, from time to

time. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s).



4.5% 3.7% 3.5% 3.4% 3.4% 3.1%

2.5% 2.5% 2.4% 2.3%

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Axis Focused 25 Fund: Positioning

Active high conviction

investing strategy

Concentrated focus on

sustainable businesses

Pure bottom-up, best-ideas

approach with high active

allocation relative to the

benchmark

Risk management embedded

in the investment process

1

2

3

4

Can participate in opportunities across the spectrum

*Note: Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view

of the equity markets. The range of capitalization is an average of the last 4 quarters and is monitored on quarterly basis

Invests in up to 25 companies where the fund manager has high conviction

S&P BSE 500 Index ( 500 stocks – Market Cap in INR crores)

Largest Market Cap Smallest Market Cap

157

200th Stock

5,962 17,495 1,299

Large Cap Mid Cap

Aims to primarily invest upto 90% of its equity allocation in

the top 200 stocks by market capitalization*

481,876

Follows a high conviction strategy

* Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the equity

markets. 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 stock mentioned,

from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s).

Focus on upto 25 best ideas with high

conviction while remaining diversified

o Currently, out of the 25 stocks, 15 are

outside benchmark

Top 5 stocks outside benchmark Weight

Jubilant Foodworks Limited 4.3%

Tata Motors Limited DVR 4.3%

Page Industries Limited 4.1%

Siemens Limited 3.8%

Bajaj Finance Limited 3.4%

Sector Fund Wt Index Wt Overweight

Capital Goods, Eng 17.3% 5.5% 11.8%

Autos & Logistics 13.0% 8.9% 4.2%

Media & Publishing 3.1% 0.6% 2.4%

Consumer 11.5% 9.5% 2.1%

Cement & Building 4.9% 3.0% 1.9%

Focus on picking business cycles which forms

the key to performance

o The overweight sectors over benchmark

are:

Provides a sustainable long term strategy


* Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the equity

markets. 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

stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s).

Std Dev (%) 13.8


Tracking Error 5.5


Beta 0.85

Risk parameters (Since Inception) Top 5 sector holdings


7.7% 6.2% 6.1% 5.5% 5.3% 5.1% 4.9% 4.9% 4.9% 4.3%

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NAV Movement

34

Annexure

Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. The above data

excludes performance of all the schemes which have not completed a year.

Annexure for returns of schemes managed by fund manager (as on 31st Mar 2015)

35

Annexure

Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV.

#Scheme Performance may not be strictly comparable with that of its additional benchmark in view of hybrid nature of the scheme.

The above data excludes performance of all the schemes which have not completed a year.

#

#

#

#

#

#

#

#


36

Annexure

Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV.

#Scheme Performance may not be strictly comparable with that of its additional benchmark in view of hybrid nature of the scheme

The above data excludes performance of all the schemes which have not completed a year.


#

#

#

#

37

Axis Long Term Equity Fund

This product is suitable for investors who are seeking *

• Capital appreciation & generating income over long term

• Investment in a diversified portfolio predominantly consisting

of equity and equity related instruments

• High risk (BROWN)

Axis Income Saver


• Capital appreciation while generating income over medium to long

term

• Investment in debt and money market instruments as well as equity

and equity related instruments while managing risk through active

asset allocation

• Medium risk (YELLOW)

Axis Hybrid Fund – Series 1 to 7


• Capital appreciation while generating income over medium to long

term

• Investment in debt and money market instruments as well as

equity and equity related instruments

• Medium risk ( YELLOW)

Axis Equity Fund


• Capital appreciation over long term

• Investment in a diversified portfolio predominantly consisting

of equity and equity related instruments


Axis Midcap Fund



• Investment in a diversified portfolio predominantly

consisting of equity and equity related instruments


Axis Focused 25 Fund



• Investment in in a concentrated portfolio of equity &

equity related instruments of up to 25 companies


Axis Triple Advantage Fund


• Capital appreciation & generating income over long term

• Investment in a diversified portfolio of equity and equity

related instruments, fixed income instruments & gold

Exchange Traded Funds


Axis Capital Protection Oriented Fund – Series 1 to 5


• Capital appreciation with low risk of capital loss over

medium to long term.

• Investment in debt and money market instruments as

well as equity and equity related instruments


*Investors should consult their financial advisors if in doubt about whether the

product is suitable for them. Note: Risk is represented as:

(BLUE) investors understand that their principal will be at low risk

(YELLOW) investors understand that their principal will be at medium risk

(BROWN) investors understand that their principal will be at high risk

Axis Small Cap Fund



• investment in a diversified portfolio predominantly equity and

equity related instruments of small cap companies


Statutory Details and Risk Factors

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 stock

mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors

before taking any investment decision(s).

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 Rs. 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.

This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the

basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis

Asset Management Company Limited, its Directors or associates shall be liable for any damages

including lost revenue or lost profits that may arise from the use of the information contained herein. No

representation or warranty is made as to the accuracy, completeness or fairness of the information and

opinions contained herein. The AMC reserves the right to make modifications and alterations to this

statement as may be required from time to time.

Mutual Fund Investments are subject to market risks, read all scheme related documents

carefully.

Data updated as on 31st Mar 2015

indian equities - think long term...with a 3 year lock in offers tax benefit under section 80c of...

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