Mutual Funds

Axis Midcap: Attractive returns in turbulent times

Parvatha Vardhini C | Updated on December 08, 2019 Published on December 07, 2019

The fund has managed to ride out volatility in the past two years through deft asset allocation

Even as the bellwether Sensex notched up double-digit gains of about 14 per cent in the past year, the BSE Midcap index has, at best, been flat during the period.

After trading at a premium, valuation of the mid-cap index is on par with the large-cap index now, making mid-cap stocks an attractive bet. Investors can take exposure to this segment of the market through Axis Midcap Fund.

After a lacklustre few years during 2015-2017, when it underperformed the benchmark, the fund has pulled up its socks. In the past year, despite a rather dull show by the mid-cap index, the fund delivered returns of 14.5 per cent, making it the top performer in the mid-cap fund category.

The scheme was able to contain its losses well in 2018, too, amid the market volatility. Over longer terms of three- and five years, the fund has bettered its benchmark’s returns by 9 percentage points and 1.5 percentage points, respectively.

 

 

 

Strategy

Mid-cap funds are mandated to hold at least 65 per cent of their assets in mid-cap stocks. The fund predominantly sticks to this mandate, holding 35-40 stocks. Axis Midcap has managed to ride the volatility in the last one to two years through deft asset allocation. During iffy and falling market conditions, the scheme reduces its equity exposure in order to cut losses.

This has been one of the key reasons for the fund’s good performance in the past two years. While the fund held about 95 per cent in equities on an average during the 2017 market rally, it was quick to bring it down when the tide turned in 2018.

In 2019, it has consistently held only 80-89 per cent in equities. In the 2014 and 2017 rallies, it latched on to cyclicals such as auto and auto ancillaries. Defensive consumer non-durable holdings stood at 8-10 per cent for many months during the 2018 volatility.

Current portfolio

In its latest October 2019 portfolio, the scheme holds about 40 stocks, with 65.75 per cent in mid caps.

Prominent mid-cap holdings such as Info Edge (India) ( 5.55 per cent) and Indraprastha Gas (3.11 per cent) have delivered well for the fund over the past year, sporting gains of 50- 60 per cent.

Other mid-cap holdings such as Mphasis and Voltas, too, have helped performance. Top sector choices are banks, finance and consumer durables. In the last year, the fund has shrunk its holdings in pharma substantially, given the regulatory headwinds for the sector.

The scheme recently added Whirlpool, Torrent Pharma and TVS Motors.

It holds only 88 per cent in equities and the rest in debt, indicating a cautious view of the markets.

Published on December 07, 2019
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