 "Axis Equity Fund: Prudent stock, sector selection boosts returns")
Launched in January 2010, Axis Equity Fund has been ranked CRISIL Fund Rank 2 (11th to 30th percentile of the peer set indicating good performance) in the Large Cap Equity category under the CRISIL Mutual Fund Ranking for the quarter ended June. The fund has been in the top 30 percentile of the peer group for the past two quarters since it met the inception criteria for CRISIL Mutual Fund Ranking. The fund, managed by Pankaj Murarka, had average assets under management (AUM) of Rs 547 crore for the quarter ended June.
Investment objective
The investment objective of the fund is to achieve long-term capital appreciation by investing in a diversified portfolio predominately consisting of equity and equity-related instruments. The fund intends to invest in a diversified portfolio of strong growth companies.
Performance
The fund has outperformed both its benchmark (CNX Nifty Index) and the category as represented by CRISIL – AMFI Large Cap Fund Performance Index over six months, one year, two and three years.
An investment of Rs 1,000 since inception (January 5, 2010) of the fund would have appreciated to Rs 1,262 at an annualised growth rate of 6.45 per cent as on September 24, 2013. An equal amount invested in the benchmark would have returned Rs 1,116, while the category would have yielded Rs 1,145 during the same period by giving 3 per cent and 3.71 per cent annualised returns, respectively.
The fund’s consistent performance is also linked with lower volatility (measured by standard deviation) of 19.39 per cent, compared to the benchmark (22.03 per cent) and the category (19.45 per cent) over the three-year period. Even on a risk-adjusted basis, over the past three years, the fund has a higher Jensen’s alpha (outperformance over benchmark) at 1.68 per cent compared to the category’s 0.004 per cent.
A monthly investment of Rs 1,000 under the systematic investment plan (SIP), as on September 24, 2013, since inception of the fund would have grown to Rs 52,029 at a compounded annual growth rate (CAGR) of 7.76 per cent. A similar investment in the benchmark would have grown to Rs 48,629 at a CAGR of 4.12 per cent.
Portfolio Strategy
The average equity exposure to CRISIL defined large cap stocks (top 100 stocks based on average market capitalisation on the National Stock Exchange) is 85 per cent of average equity allocation over the past three-year period ending August 2013. The fund has varied exposure to equity over three year period; the average exposure stood at 92 per cent.
The fund held an average of 38 stocks in its portfolio over a three-year period, compared to 41 for the category. Exposure of the fund to the top 10 equity holdings over the past three years is 55 per cent, compared to the category’s 50 per cent. Most of the top 10 stocks in the fund were held consistently for the past three years. Exposure to top holdings such as HDFC Bank and ITC has helped the fund generate higher returns. HDFC Bank and ITC gave 11.64 per cent and 23.68 per cent annualised returns, respectively, over the past three years. Further, 20 per cent of the portfolio was held for less than two years, indicating the fund has been actively managing its equity exposure.
At the sector level, banks have been the most favoured sector in the fund over the past three years with an average 20.36 per cent exposure followed by software and finance with 14.73 per cent and 11.10 per cent, respectively. The fund has been overweight on finance, banks, pharma and consumer non-durables (in the range of 5-2 per cent), compared to the benchmark during the same period. Amongst the top five sectors, software, pharma and consumer non-durables represented by CNX IT Index, CNX Pharma Index and CNX FMCG Index, respectively, gave 11.94 per cent, 19.14 per cent and 23 per cent annualised returns, compared to the CNX Nifty’s 0.43 per cent over a three-year period ended August 2013. This has mainly contributed to the fund’s excess returns over the benchmark. At the sector level, the fund’s exposure to the top five industries is 63 per cent vis-à-vis the category’s 53 per cent.
Investment objective
The investment objective of the fund is to achieve long-term capital appreciation by investing in a diversified portfolio predominately consisting of equity and equity-related instruments. The fund intends to invest in a diversified portfolio of strong growth companies.
Performance
The fund has outperformed both its benchmark (CNX Nifty Index) and the category as represented by CRISIL – AMFI Large Cap Fund Performance Index over six months, one year, two and three years.
An investment of Rs 1,000 since inception (January 5, 2010) of the fund would have appreciated to Rs 1,262 at an annualised growth rate of 6.45 per cent as on September 24, 2013. An equal amount invested in the benchmark would have returned Rs 1,116, while the category would have yielded Rs 1,145 during the same period by giving 3 per cent and 3.71 per cent annualised returns, respectively.
The fund’s consistent performance is also linked with lower volatility (measured by standard deviation) of 19.39 per cent, compared to the benchmark (22.03 per cent) and the category (19.45 per cent) over the three-year period. Even on a risk-adjusted basis, over the past three years, the fund has a higher Jensen’s alpha (outperformance over benchmark) at 1.68 per cent compared to the category’s 0.004 per cent.
A monthly investment of Rs 1,000 under the systematic investment plan (SIP), as on September 24, 2013, since inception of the fund would have grown to Rs 52,029 at a compounded annual growth rate (CAGR) of 7.76 per cent. A similar investment in the benchmark would have grown to Rs 48,629 at a CAGR of 4.12 per cent.
Portfolio Strategy
The average equity exposure to CRISIL defined large cap stocks (top 100 stocks based on average market capitalisation on the National Stock Exchange) is 85 per cent of average equity allocation over the past three-year period ending August 2013. The fund has varied exposure to equity over three year period; the average exposure stood at 92 per cent.
The fund held an average of 38 stocks in its portfolio over a three-year period, compared to 41 for the category. Exposure of the fund to the top 10 equity holdings over the past three years is 55 per cent, compared to the category’s 50 per cent. Most of the top 10 stocks in the fund were held consistently for the past three years. Exposure to top holdings such as HDFC Bank and ITC has helped the fund generate higher returns. HDFC Bank and ITC gave 11.64 per cent and 23.68 per cent annualised returns, respectively, over the past three years. Further, 20 per cent of the portfolio was held for less than two years, indicating the fund has been actively managing its equity exposure.
At the sector level, banks have been the most favoured sector in the fund over the past three years with an average 20.36 per cent exposure followed by software and finance with 14.73 per cent and 11.10 per cent, respectively. The fund has been overweight on finance, banks, pharma and consumer non-durables (in the range of 5-2 per cent), compared to the benchmark during the same period. Amongst the top five sectors, software, pharma and consumer non-durables represented by CNX IT Index, CNX Pharma Index and CNX FMCG Index, respectively, gave 11.94 per cent, 19.14 per cent and 23 per cent annualised returns, compared to the CNX Nifty’s 0.43 per cent over a three-year period ended August 2013. This has mainly contributed to the fund’s excess returns over the benchmark. At the sector level, the fund’s exposure to the top five industries is 63 per cent vis-à-vis the category’s 53 per cent.
CRISIL Research