Indian equity markets continued to move higher in July. The Nifty is ... exuberance has helped broaden market participat
EQUITY OUTLOOK AUGUST 2016
9.5%
-1.2
Nifty 50 - Last 5 years
4.2
%
Nifty 50 - Last 1 year
%
Nifty 50 - MTD
Returns for period more than one year are compounded annualized.
Quick take •
Equity market valuations are broadly reasonable.
•
We remain bullish on equities from a medium to long term perspective.
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Investors are suggested to have their asset allocation plan based on one’s risk appetite and future goals in life.
Key highlights GLOBAL
Indian equity markets continued to move higher in July. The Nifty is up 24 percent from its lows in February. The market sentiment has turned bullish helped by renewed foreign flows, improvement in domestic growth prospects and progress in policy rollout. The exuberance has helped broaden market participation as mid-cap stocks have also rallied. The market is also witnessing a big IPO pipeline after many years. Both retail and institutional participation in recent IPOs has been really strong and will help more companies come to the market. Global equity markets rallied sharply in July as they looked past the immediate impact of the Brexit vote that had led to a correction towards the end of June. As global growth remains soft and on the back of the new uncertainty from the British vote, it is likely that the developed market central banks will retain the bias towards easy monetary policy. Commodities market on the other hand have paused from their first half rally. Crude saw a sharp slide as global inventories for crude and downstream products continue to build up and also as some supply disruptions have normalized.
DOMESTIC
Monsoon season has started in earnest in June. July saw above normal rainfall which helped the khari season sowing to get underway. A good monsoon season which leads to a good harvest should help boost rural incomes and consequently consumption. High frequency economic growth data have remained volatile – a sign of a mixed economy where some sectors are on the upswing while others remain challenged. It is also reflected in the fact that consumer sectors are generally performing better than the investment sectors. The data continue to indicate that a gradual (but uneven) cyclical recovery is underway that should push GDP growth higher over the next year. Inflation has edged up in the past few months although it remains within the broad target range of RBI. The announcement on the appointment of the new RBI Governor is expected shortly. Bond yields have come off sharply in the past few weeks in anticipation of a more dovish choice. However the actual direction of policy will only be known over the next few months.
CORPORATE
Government has continued to push on reform measures. The GST discussions are reaching a crucial juncture with most of the political parties and state chief ministers indicating their support. Passing the bill is a big test of the governent’s execution capability. The implementation of 7th Central Pay Commission (CPC) recommendations is expected to provide a big boost to urban discretionary consumption in the coming months. Jun quarter earnings season is underway and while broad numbers are patchy, quality consumer and financial companies have reported strong profit growth. Infrastructure and commodity sectors continue to remain challenged. Over the medium term earnings should start reflecting the improvement in the growth environment and has the potential to run ahead of nominal economic growth as the cycle strengthens.
Top 10 Stocks (By Holding)
AXIS EQUITY FUND • • • • •
The fund focuses on delivering superior risk adjusted returns. The fund manager targets out-performance to the benchmark while delivering risk that is lower than the benchmark. Stocks are selected in the portfolio based on their ability to grow earnings on a sustainable basis from a medium term perspective while maintaining a highly liquid and risk managed portfolio. While the approach of the fund manager is towards having a stable portfolio over the medium term, the fund manager makes adjustments as needed as it looks at the evolving cycle and prospects for corporate earnings. As the economy shows steady improvement, the fund manager has constructed the portfolio with companies that should be able to take advantage of this cyclical improvement to grow topline and earnings. Within the overall sector and market cap limits, the fund remains balanced in its allocation between mid-cap and large-cap stocks and should benefit from the expected improvement in the economy over the next 2-3 years.
Top 5 Sectors
%
(as on 29th July 2016)
(as on 29th July 2016)
35.2%
HDFC Bank Limited
8.5
Larsen & Toubro Limited
6.7
HDFC Ltd
6.6
ICICI Bank Limited
5.9
Zee Entertainment Enterprises Ltd.
5.4
Tata Motors Limited
5.1
Infosys Limited
4.9
Kotak Mahindra Bank Limited
4.5
Sun Pharmaceuticals Industries Ltd.
3.6
Mahindra & Mahindra Limited
3.0
12.9% 11.2% 9.9%
Finance
Autos & Logistics
Capital Goods, Eng.
Information Technology
6.9%
Healthcare
Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the equity markets.
AXIS LONG TERM EQUITY FUND (An open-ended Equity Linked Savings Scheme with a 3-year lock-in)
•
The fund is focused on quality companies having strong long term earnings growth prospects. Within that objective, the fund is comfortable looking past shorter term volatility in performance.
•
With a medium to long term view towards capturing growth, the fund is biased towards stocks which can deliver superior returns. This includes private sector banks, autos, auto ancillary, housing & consumption sector etc.
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The fund also includes bottom-up stock selection ideas in Pharma, IT and defence sectors. Normally, the fund has avoided highly cyclical stories and highly regulated sectors.
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The fund looks at opportunities across the market cap and the portfolio remains balanced between its large and mid-cap allocations.
Top 5 Sectors
(as on 29th July 2016)
31.4% 16.4%
Autos & Logistics
%
HDFC Bank Limited
8.3
Kotak Mahindra Bank Limited
7.6
HDFC Ltd
6.1
Sun Pharmaceuticals Industries Limited
6.0
Maruti Suzuki India Limited
5.2
Larsen & Toubro Limited
5.1
Tata Consultancy Services Limited
5.1
Pidilite Industries Limited
4.5
Motherson Sumi Systems Limited
3.9
Bajaj Finance Limited
3.1
16.1% 10.4%
Finance
Top 10 Stocks (By Holding) (as on 29th July 2016)
Consumer
10.1%
Capital Goods, Eng. Healthcare
Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the equity markets.
Top 10 Stocks (By Holding)
AXIS MIDCAP FUND
Procter & Gamble Hygiene and Health Care Limited
5.1
Gruh Finance Limited
5.0
PVR Limited
4.6
The fund remains true-to-label in its portfolio allocations with a diversified and risk-managed mid-cap portfolio which has a superior liquidity profile.
Sanofi India Limited
4.2
This approach has helped the fund navigate the cycle by delivering consistent returns while keeping a tight control on risk.
Page Industries Limited
4.2
City Union Bank Limited
4.1
Dish TV India Limited
3.5
Gulf Oil Lubricants India Limited
3.5
V.S.T Tillers Tractors Limited
3.5
Tata Chemicals Limited
3.5
•
Since October last year the portfolio has been consolidated into higher conviction stocks while retaining the overall bias in favour of high quality bottom-up stocks that provide potential to grow cashflows over the medium term.
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The portfolio seeks to add businesses with economic moats and distinct competitive advantage.
• •
%
(as on 29th July 2016)
Top 5 Sectors
(as on 29th July 2016)
24.5% 22.3%
17.6% 8.1%
Finance
Autos & Logistics
Consumer
Media & Publishing
6.6%
Healthcare
Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the equity markets.
Top 10 Stocks (By Holding)
AXIS FOCUSED 25 FUND •
The fund manager runs a high conviction portfolio, containing the fund manager’s best ideas and invests in upto 25 stocks.
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Despite having a compact portfolio, diversification and focus on quality has kept the fund’s risk contained relative to the benchmark.
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The stock selection approach focuses on businesses where earnings can compound at a much higher rate than peers due to the superior quality of their business model.
Top 5 Sectors 29.6%
(as on 29th July 2016)
16.0%
Autos & Logistics
Sun Pharmaceuticals Industries Ltd.
8.0
HDFC Bank Limited
6.9
Shree Cements Limited
6.1
Kotak Mahindra Bank Limited
6.0
Tata Consultancy Services Limited
5.7
Larsen & Toubro Limited
5.6
Tata Motors Limited
5.5
Motherson Sumi Systems Limited
4.4
Gruh Finance Limited
4.3
Nestle India Limited
4.2
12.7% 11.3%
Finance
%
(as on 29th July 2016)
Consumer
Capital Goods, Eng.
10.5%
Healthcare
Current Portfolio Allocation is based on the prevailing market conditions and is subject to changes depending on the fund manager’s view of the equity markets.
Riskometer
Axis Equity Fund (an open-ended growth scheme) This product is suitable for investors who are seeking*:
• Capital appreciation & generating income over long term
Riskometer
Axis Midcap Fund
LOW
HIGH
Investors understand that their principal will be at moderately high risk
Riskometer
M ely Moderate ode rat e Hig rate d h ly Mo Low
(an open-ended equity scheme) This product is suitable for investors who are seeking*:
LOW
HIGH
Investors understand that their principal will be at moderately high risk
• Investment in in a concentrated portfolio of equity & equity related instruments of up to 25 companies *Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
LOW
High
Low
• Capital appreciation over long term High
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
Axis Focused 25 Fund
M ely Moderate ode rat e Hig rate d h ly Mo Low
(an open-ended equity scheme) This product is suitable for investors who are seeking*:
• Capital appreciation over long term • Investing predominantly in equity & equity related instruments of mid size companies with focus on relatively larger companies within this category
HIGH
Investors understand that their principal will be at moderately high risk
Low
Low
LOW
• Investment in a diversified portfolio predominantly consisting of equity and equity related instruments
Low
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
This product is suitable for investors who are seeking*:
High
• Investment in a diversified portfolio predominantly consisting of equity and equity related instruments
M ely Moderate ode rat e Hig rate d h ly Mo Low
(an open-ended equity linked savings scheme with a 3 year lock-in)
High
• Capital appreciation over long term
Riskometer
Axis Long Term Equity Fund
M ely Moderate ode rat e Hig rate d h ly Mo Low
HIGH
Investors understand that their principal will be at moderately high risk
Data as on 29th July 2016. Source of data: Bloomberg, ACEMF Disclaimer: Past performance may or may not be sustained in the future. Sector(s) / Stock(s) / Issuer(s) mentioned above are for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). This document should not be construed as research report. Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to ` 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC) Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
