Mutual Funds

Axis Midcap: Buy

K Venkatasubramanian | Updated on June 08, 2014


The fund has been on the right side of market movements, both in stock and sector calls

Investors looking to benefit from the market rally can buy the units of Axis Midcap, given its strong performance record over the past three years.

The scheme came into being in early 2011 and has since proven itself as a reliable fund capable of delivering returns ahead of peers and its benchmark consistently. On a one- and three-year basis, Axis Midcap has outperformed the BSE Midcap, its benchmark, by a solid 12-14 percentage points; it has also matched or exceeded the category average convincingly.

In the last three years, the fund has delivered annual returns of 21.3 per cent, which is higher than peers' such as DSPBR Mid and Small Cap, Canara Robeco Emerging Equities and Franklin India Prima.

It has also outperformed top names such as IDFC Premier Equity over the past three years.

Investors with medium risk appetite can take exposure to the scheme as a diversifier, with a five-seven year horizon.

They can also opt for the SIP (systematic investment plan) route so as to average out costs across cycles.

Strategy and portfolio

The scheme has been able to deliver well by shifting from defensives to cyclicals and generally being on the right side of market movements by choosing the right sectors.

It also tempers risk of erosion in its NAV during corrective phases by taking cash calls.

Axis Midcap’s exposure to individual stocks and sectors is not concentrated, which further reduces the risks generally associated with mid-cap funds.

Axis Midcap has generally favoured banks as its top segment over the years, though exposure has varied a bit to suit the markets. But its other key sectors have all been well churned.

So, consumer non-durables, software and pharma were all among its top holdings in 2012.

As valuations soared, it trimmed stakes in consumer non-durables in early 2013.

In the volatile and corrective markets that started in May last year, the scheme took cash and debt calls to the tune of nearly 10 per cent of its portfolio.

In the rally from late 2013, the fund was able to redeploy cash and participate reasonably in the upswing.

In the meanwhile, it also upped exposure to cyclical segments such as auto, auto ancillary and construction projects.

Exposure to individual stocks is almost always less than 5 per cent. In the case of sectors, except banks, most other top segments account for less than 9-10 per cent of the overall portfolio.

Axis Midcap’s risk profile is thus lower than many other mid-cap schemes, more so with its cash calls.

Its picks from the mid-cap space are also generally of reasonable quality.

So, names such as CMC, DB Corp, Federal Bank, Eicher Motors, GSPL and VST Tillers figure prominently in its portfolio.

Published on June 08, 2014

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