Equity Outlook - May 2016 - Axis Mutual Fund

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EQUITY. OUTLOOK. JUNE 2016. Quick take. -3.2%. Nifty 50 - Last 1 year. Key highlights. 4.0%. Nifty 50 - MTD. • Equity
EQUITY OUTLOOK JUNE 2016

8.0%

-3.2

Nifty 50 - Last 5 years

4.0

%

Nifty 50 - Last 1 year

%

Nifty 50 - MTD

Quick take •

Equity market valuations are broadly reasonable.



We remain bullish on equities from a medium to long term perspective.



Investors are suggested to have their asset allocation plan based on one’s risk appetite and future goals in life.

Key highlights GLOBAL

Indian equities continued to move higher in May. The Nifty is now up 17% from its lows in February. The overall sentiment has improved markedly helped by renewed foreign flows, improvement in domestic environment and progress in policy rollout. Global equity markets continued their move higher. Crude continued higher as well even though other commodities were weaker after their sharp rallies in March and April. The US Fed is widely expected to raise rates in its June meeting even as US and global growth remains tepid. The Indian market sentiment was helped by forecasts of an above normal monsoon. Skymet raised Indian monsoon forecast to 109% for the period of Jun to Sep. In Apr Indian Met department had forecasted rainfall at 106% for the 2016 southwest monsoon. This compares with 88% and 86% rainfall received in the 2014 and 2015 season respectively. Q4 GDP growth came at 7.9% which was better than the Q3 number of 7.2%. Growth was led by consumption while investment remained a drag.

DOMESTIC

Recent macro and high frequency data indicate a gradual (but uneven) cyclical recovery is underway that should push GDP growth higher over the next year. Industrial production and PMI (both manufacturing and services) have shown an improving trend but remain highly volatile. Going forward, impact of pay commission awards should help urban discretionary consumption. Likewise a normal monsoon should help push rural demand. The government is seeing good progress in implementing its reform agenda. Bankruptcy bill was passed by the parliament and is a key part of the government’s focus on improving ease of doing business in India. India’s external accounts have remained comfortable even as the BoP surplus has narrowed in the absence of large portfolio inflows. The Indian Rupee, which had seen some weakness at the beginning of the year, has stabilized in the last few months broadly tracking the performance of other Asian currencies.

CORPORATE

Inflation trajectory remains within the RBI’s comfort zone, and further cushion on inflation should come as food inflation moderates. While further policy rate cuts are likely limited, better transmission and changed liquidity stance, should lead to lower rates over the next 12 months. Q4 earnings were reflected a modest improvement in trend from the previous quarters. Sectors linked to infrastructure and industrial capex remain subdued. 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 have 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 31st May 2016)

32.3% 14.4%

Information Technology

HDFC Bank Limited

8.4

Infosys Limited

7.4

HDFC Ltd

6.1

Larsen & Toubro Limited

5.6

Zee Entertainment Enterprises Ltd.

5.0

Tata Motors Limited

4.9

Kotak Mahindra Bank Limited

4.6

Sun Pharmaceuticals Industries Ltd.

3.5

Bharti Airtel Limited

3.0

Tech Mahindra Limited

2.9

12.4% 10.0%

Finance

%

(as on 31st May 2016)

Autos & Logistics

Capital Goods, Eng.

6.5%

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.

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 the stocks which can deliver superior returns. This includes private sector banks, autos, auto ancillary, housing & consumption sector etc.



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.



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 31st May 2016)

31.0% 17.0%

Consumer

%

HDFC Bank Limited

8.1

Kotak Mahindra Bank Limited

7.7

Tata Consultancy Services Limited

6.4

HDFC Ltd

6.3

Larsen & Toubro Limited

5.6

Sun Pharmaceuticals Industries Limited

5.4

Pidilite Industries Limited

4.9

Maruti Suzuki India Limited

4.4

Motherson Sumi Systems Limited

3.8

TTK Prestige Limited

3.0

14.6% 10.7%

Finance

Top 10 Stocks (By Holding) (as on 31st May 2016)

Autos & Logistics

10.0%

Capital Goods, Eng. Information Technology

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

5.1

Page Industries Limited

4.3

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

4.1

This approach has helped the fund navigate the cycle by delivering consistent returns while keeping a tight control on risk.

PVR Limited

3.8

Dish TV India Limited

3.7

City Union Bank Limited

3.6

CRISIL Limited

3.5

V.S.T Tillers Tractors Limited

3.5

Cholamandalam Investment and Finance Company Limited

3.5



The fund manager has used the recent sell-off to consolidate the portfolio 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.



The portfolio seeks to add businesses with economic moats and distinct competitive advantage.

• •

Top 5 Sectors

(as on 31st May 2016)

27.9% 19.5%

17.3% 7.5%

Finance

Autos & Logistics

Consumer

Media & Publishing

6.4%

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.



Despite having a compact portfolio, diversification and focus on quality has kept the fund’s risk contained relative to the benchmark. 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 30.6%

(as on 31st May 2016)

16.2%

Autos & Logistics

HDFC Bank Limited

7.6

Infosys Limited

7.3

Kotak Mahindra Bank Limited

6.8

Tata Motors Limited

5.9

Sun Pharmaceuticals Industries Ltd.

5.6

Shree Cements Limited

5.2

Gruh Finance Limited

4.4

Tata Consultancy Services Limited

4.3

Motherson Sumi Systems Limited

4.3

Bajaj Finance Limited

4.2

11.7% 11.5%

Finance

%

(as on 31st May 2016)





%

(as on 31st May 2016)

Information Technology

Capital Goods, Eng.

8.2%

Consumer

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 31st May 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.