Axis Long Term Equity: Buy

It’s a relatively new tax-saving fund, but it has put up a thumping performance.

Axis Long Term Equity was launched in December 2009. Its return of 13.3 per cent since its inception beats that of its benchmark BSE 200 hollow. Investors looking for tax benefits can invest in the fund.

Compared with peers in this space, Axis Long Term Equity ranks at the top over one- and three-year timeframes.

Over the last one- and three-year periods, the fund has delivered annual returns of 12.8 per cent and 12 per cent, respectively. The BSE 200 has returned 1.3 per cent and 3.1 per cent.

True, the fund has a short history compared with peers such as Franklin Tax Shield or ICICI Pru Tax Plan, which have good performance cards too.

Still, the equity market has offered a rough ride even in the past four years — a reasonable upswing in 2010, a depressed 2011, euphoric 2012 and a volatile 2013.

Axis Long Term’s consistent performance in these periods suggests it is on the right track. On an annual rolling return basis, the fund has outdone the BSE 200 almost all the time.

Sectors and stocks are not churned quickly, with the fund following a buy-and-hold approach to its stock selection process. Holdings are also relatively concentrated, with the top ten stocks making up about half the total portfolio value. The fund straddles different market capitalisations, though always oriented towards large-cap stocks.

Focused bets on stocks such as Kotak Mahindra Bank, Tree House Education, ITC, HDFC, TTK Prestige, Page Industries and Bata India have paid off. However, this also pegs up the overall risk.

Axis Long Term’s December portfolio has about 68 per cent in stable large-cap stocks, 25 per cent in mid-caps and about 5 per cent in small-cap stocks. This proportion has more or less remained the same.

Banking, finance and software have always been top holdings.

The fund has usually got its calls right. For instance, a gradual build-up in the pharmaceutical sector from 2011 resulted in hefty gains in stocks, such as Divi’s Labs.

Consumer durables, automobile and auto-ancillary stocks added in 2011 and held on to since have reaped returns. The fund holds beaten-down sectors such as capital goods and infrastructure, too.

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