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A stable and impressive performance since its inception in January 2010 makes the Axis Equity Fund a good investment option among diversified equity funds. The scheme is benchmarked to the CNX Nifty index.
The large-cap oriented nature of this fund suits those with a low appetite for risk, helping such investors participate reasonably well in market rallies and also limit their losses during falls.
Performance and strategy
Axis Equity is a top quartile performer over one-, two- and three-year timeframes. In all these periods, it has given better returns than the Nifty, to the tune of 2-6 percentage points.
The fund’s sector and stock choices help in its performance. In 2011, for instance, the fund was quick to heighten exposure to consumer non-durables, a defensive choice in falling markets.
The allocation to this sector was stepped up to about 13 per cent in this period, from the 5-8 per cent levels seen the year before. This, the higher cash holdings, helped the fund limit losses to 22.5 per cent in 2011, about 2-3 percentage points better than the Nifty.
In the last one year, it has emerged among the top five performers in the diversified equity funds category. Consistent holdings in stocks such as Dr Reddy’s, ITC, TCS and Sun Pharma, which have gained 35-65 per cent in the last one year, has helped.
Playing safe
Besides, the fund plays safe by exiting sectors/stocks where valuations have catapulted and entering ones which are either beaten down or offer good prospects at reasonable valuations.
The exit from Page Industries, Hindustan Unilever, GlaxoSmithKline Consumer, the entry into Bharti Airtel and Power Grid and the increased exposure to software stocks since January 2013 is testimony to this.
The fund also finds safety in cash/debt holdings during times of uncertainty in the markets or during falls. In the second half of 2011, it held 8-10 per cent in cash.
Considering the highly volatile markets in the last few months, the fund has held only 85-90 per cent in equities. Exposure to derivatives off and on also helps hedge market volatility.
Portfolio
Although exposure to banks has been reduced gradually in the last six months, it remains the top sector choice along with software.
As of August 2013, the fund sports an average market capitalisation of about Rs 64,000 crore.
Promising mid-cap picks in the current portfolio include Persistent Systems, ING Vysya Bank and Tata Motors DVR.
The NAV per unit of the growth option is Rs 12.6.
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