Mutual Funds

Axis Focused 25: Impresses with strong show

Yoganand D | Updated on January 11, 2018 Published on July 29, 2017

Axis eps

This relatively young large-cap has scored with smart market moves

Axis Focused 25 Fund is a relatively new large-cap fund that has been around since June 2012. After a sluggish start in 2013, the fund witnessed a strong rally in 2014, beating the benchmark index Nifty 50 by 7 percentage points. During the choppy market phases of 2015 and 2016 too, the fund outperformed its benchmark convincingly. So far in 2017, the fund has clocked a year-to-date return of 30 per cent while the Nifty 50 has advanced 22 per cent.

On a one-year rolling return basis over the past five-year period, the fund has beaten its benchmark 78 per cent of the times. The level of outperformance is very high over the last one year as the fund has outshone its benchmark 99 per cent of the time.

Interestingly, over a one-year period, the fund outclassed some veteran funds in the large-cap oriented segment, namely SBI BlueChip, HDFC Top 200 and Franklin India Prima Plus.

The fund follows a high conviction investment approach, having only a maximum of 25 stocks in the portfolio. It invests primarily in the top 200 stocks by market capitalisation. It not only focuses on growth potential of the stocks but also places emphasis on quality. Investors with a long-term perspective of three to five years could buy the units of Axis Focused 25. Investors who don’t want to risk investing lumpsums at a market peak can take the SIP route so that volatility can be mitigated.

Performance and strategy

Banking, finance and auto ancillaries are the top preferred sectors that account for about 40 per cent of the portfolio. The fund has drastically upped its allocations in auto ancillaries and trimmed it in the software sector over the last one year. This strategy has paid off.

In banking, it mainly holds private sector banking stocks such as HDFC Bank and Kotak Mahindra Bank. These stocks have delivered excellent returns this year. Concentrating on a limited number of stocks deepens the risk of the fund’s returns being impacted if these stocks underperform.

But with the flexibility of churning, the fund manages the risk quite well. For instance, the stock of Sun Pharma to which the fund had about 7 per cent exposure has been an underperformer. However, the fund exited it last November to cut losses. The fund takes active cash and debt calls and has increased its holding up to 9.5 per cent to cash/debt now. This indicates a cautious stance as the markets move to record highs.

The fund added Supreme Industries and Bosch to its portfolio recently, which have given good returns so far. It had short-term holdings in some stocks and exited them at the right time, before they fell sharply. For example, it had entered and exited Bharat Forge and Tech Mahindra in a timely fashion.

Nevertheless, the fund does adopt a long-term holding strategy and stocks such as HDFC Bank, Kotak Mahindra Bank, Motherson Sumi Systems, GRUH Finance and Cummins India have been in the portfolio for over a year. The fund recently entered the construction projects and retail sectors by adding L&T and Avenue Supermarts.



Published on July 29, 2017
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