Axis Equity Hybrid Fund (An open ended hybrid scheme investing predominantly in equity and equity related instruments)

Transcription

1 *Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Axis Equity Hybrid Fund (An open ended hybrid scheme investing predominantly in equity and equity related instruments) NFO period: 20 th July, 2018 to 3 rd August, 2018 This product is suitable for investors who are seeking*: Capital appreciation along with generation of income over medium to long term Investment in equity and equity related instruments as well as debt and money market instruments

2 What gives best mileage in a two wheeler vehicle? Best way is driving at moderate/economy speed with controlled use of throttle Commuter motorcycles usually come with an economy indicator or a green zone painted on speedometer to display sweet spot 2

3 Making the ride frugal! MODERATE SPEED LESS THROTTLE MAXIMUM MILEAGE Consumes less fuel Offers optimum grunt Reduces load on engine Gives better control on the vehicle Increases fuel efficiency 3

4 Making the ride frugal! EQUITY FIXED INCOME RISK ADJUSTED RETURNS Opportunity to capture growth Potential of higher returns 3 year performance (Rolling return - Apr 02 May 18) Stability by being less volatile Regular income generation Potential of higher return with relatively lesser risk Minimum Maximum Average Std Deviation Risk Adjusted Return: 70% Equity + 30% Debt with monthly rebalancing. Equity: Nifty 50 TRI Index, Fixed Income: Crisil Composite Bond Fund Index; Data period: April st May Source: MFI, Axis Internal Analysis. Past performance may or may not be sustained in future. For illustration & explanation purpose only. Does not reflect performance of any scheme. All numbers are annualized. 4

5 Different Reactions Every asset has its unique benefit in a portfolio to achieve a common goal RECESSION: Low growth, low inflation, falling interest rates RECOVERY: Medium growth, stable inflation, stable interest rates GROWTH: High growth, stable inflation, stable to rising interest rates OVERHEATING: High growth, rising inflation, rising interest rates Underperform Outperform Neutral Outperform Neutral Neutral Outperform Neutral Neutral Neutral Underperform Neutral EQUITY DEBT CASH 5

6 Solution: Asset Allocation Appropriate asset allocation gives confidence though ups and downs of the market Key ingredient of successful investing DIVERSIFIES AND REDUCES RISK TAILORED TO YOUR RISK PROFILE OFFERS STABLE RETURNS OVER THE MEDIUM TERM BETTER TAX EFFICIENCY 6

7 Smart choice! Asset allocation helps avoid market traps MARKET TIMING NORMAL INVESTOR Tends to react to every market movement, thus highly exposed to uncertainty SMART INVESTOR Investment linked to the risk profile and not current market levels CHASING THE HOTTEST TREND Continuous portfolio churn restricts the portfolio from long term benefits Steady Allocation over time CYCLES OF GREED AND FEAR Irrational investment decision Asset allocation allows investors to Buy low-sell high 7

8 How does Asset Allocation work to benefit portfolios? Lower correlation among asset classes Periodic Rebalancing Reasonable downside protection Benefit from active management 8

9 Lesser the correlation among assets, lower the risk Lower correlation among assets improves diversification gains Not all asset class will move in same direction at all times. If correlation is higher, sensitivity to market movement rises. This can add to overall risk. Lower correlation acts as hedge against each other and hence reduces risk and optimizes return Bull market ( ) Bear market ( ) DEBT EQUITY Returns (CAGR) 2.4% 48.6% 18.6% -50.3% Equity: Nifty 50 Index, Debt: Crisil Composite Bond Fund Index; MFI, Axis Internal Analysis. Past performance may or may not be sustained in future. For illustration & explanation purpose only. Does not reflect performance of any scheme. 9

10 Rebalancing benefit Effective risk management technique Allocation at the start of investment Effective allocation Effective Risk^ Diminish the tendency for portfolio drift, and thus potentially reduce their exposure to risk relative to their target asset allocation WITH REBALANCING 70 Equity + 30 Debt 70 Equity + 30 Debt 13% Lowers overall risk and optimizes returns relative to target allocation WITHOUT REBALANCING 70 Equity + 30 Debt 90 Equity + 10 Debt 16% Rebalancing within the fund makes it cost & tax efficient for investors as compared to investors doing it at their end Equity: Nifty 50 Index, Debt: Crisil Composite Bond Fund Index; MFI, Axis Internal Analysis. ^Effective risk: Standard deviation based on daily returns for the investment period. Investment Period: (Apr 02 May 18). Effective allocation is the allocation at the end of the period (May 18) 10

11 SIMPLE INFOGRAPHIC SLIDE Downside protection through diversification Downside protection aim to reduce the frequency and/or magnitude of capital losses, resulting from significant asset market declines Aims to limit the impact of potential losses from market downturns 0% Higher the fall, larger is the increase required to recover -10% -20% If the markets fall by Increase needed to recover -30% -40% -50% Equity Fixed Income -10% 11% -15% 18% -20% 25% -60% Apr-02 Apr-04 Apr-06 Apr-08 Apr-10 Apr-12 Apr-14 Apr-16 Apr-18-50% 100% -80% 400% Fixed Income: CRISIL Composite Bond Fund Index, Equity : Nifty 50 Index. Drawdown is the peak-to-trough decline during a specific recorded period of an investment. Past performance may or may not be sustained in future. Drawdown is the percentage between the peak and the subsequent trough. 11

12 Benefit from active management Fund manager adds value through active management within the asset class Research based investing with fundamental approach contributes to alpha generation in overall portfolio 3 YEARS 5 YEARS 10 YEARS Index based static allocation portfolio (70% Equity + 30% Debt) CRISIL - AMFI Balance Fund Performance Index Debt: CRISIL Composite Bond Fund Index, Equity : Nifty 50 Index TRI. Source: Axis Internal Analysis, CRISL, MFI. Past performance may or may not be sustained in future. For illustration & explanation purpose only. Does not reflect performance of any scheme. All returns are compounded annualized (CAGR) 12

13 Introducing Axis Equity Hybrid Fund Product Positioning : Balanced Approach to Investing Equity Funds Fixed Income Funds Conservative Hybrid Equity Savings Funds Dynamic Equity Allocation Funds Axis Equity Hybrid Fund Indicative positioning on risk return estimates from strategy based indices. For illustrative purposes only 13

14 Scheme Proposition An open ended hybrid scheme investing predominantly in equity and equity related instruments Best of Both Worlds Equity Allocation 65-80% Debt Allocation 20-35% Equity component will follow a multi-cap bottom up best ideas strategy Debt component will follow a tactical approach across sovereign bonds and corporate bonds Please refer the Scheme Information Document for detailed description on asset allocation and investment strategy 14

15 Equity Investment Approach Large cap bias with up to 30% in midcaps* EQUITY Risk return tradeoff is likely to be favorable over the medium term Good ideas can do better irrespective of its sector/theme/size Focus on fast growing sectors with bottom up stock picking approach *Investment focus is based on current market outlook and is subject to fund manager discretion. Investors are advised to refer SID for investment strategy of the scheme 15

16 Current equity market view Summary Indian economy entering a productive growth phase We are positive on consumption with focus on urbanization with rural overlay; government reforms is expected to push growth We see initial signs of capex revival, but full fledged investment-led growth is a while away Accelerated growth in earnings is essential for valuation premium to sustain and increase We continue to expect elevated volatility levels Equity allocations should be looked at from a medium to long term perspective. 16

17 Key investment themes Focus on urbanization with rural overlay; selective at cyclical and export led stories Discretionary Consumption Rural Retail Finance Export led sectors Focus on companies with high brand recall and niche product portfolios. Also target companies benefiting from the un-organized to organized shift Capture the opportunity for consumer spending on account of government policies aimed at enhancing rural livelihoods Improving trend in rural wage growth is directly encouraging for rural consumption & indirectly for aggregate demand and for the investment cycle Improving financialisation and rural penetration is likely to benefit retail focused banks and NBFC`s Positive on B2C as compared to B2B for the last several quarters due to their underlying fundamental strengths and significant market opportunities Provide hedge against depreciating rupee Reasonable diversification to the portfolio 17

18 Debt Investment Approach Invest in best ideas DEBT The portfolio duration and credit exposures will be decided based on a thorough research Flexibility to invest in the entire range of debt instruments across credit/duration spectrum Active duration management *Investment focus is based on current market outlook and is subject to fund manager discretion. Investors are advised to refer SID for investment strategy of the scheme 18

19 Illustration of active management Judious asset mix : Two key risks to be managed: Interest rate risk and credit risk Illustrative asset mix of actively managed fund 01 Mid 2012 Favourable credit cycle let us capture the widened corporate bond spreads 02 Early 2014 Turnaround of credit cycle, slowing inflation and improving macros led us to increase our portfolio level duration predominantly via G-Sec exposure 03 Early 2016 Favourable credit environment backed by improved corporate profitability led us to shift to lower rated corporate bonds from G-Sec and reduced maturity Source: Axis AMC Internal Analysis. Non- Government Securities include all securities that are not issued by government including CDs, CPs, Corporate Bonds, ZCBs, etc. This does not indicate any proposed allocation or future performance of Axis Equity Hybrid Fund. 19

20 Current fixed income market view Summary Markets seem to have priced in 50 basis rate hikes till March 2019 We do not expect any significant rally due to fiscal worries and weak demand supply dynamics On a risk reward basis, the short end of the curve remains attractive as compared to long end of the curve Short term corporate bonds offer lucrative opportunities with elevated yields and lower volatility

21 Our focus: Improved corporate profitability Offering better spreads on lower rated bonds Improved credit ratio : 1402 upgrades and 839 downgrades in fiscal 2018 Reason for improvement: Better financial indicators as corporates kept away from capital expenditure given the output gap or substantial headroom in capacity utilisation in many sectors Credit ratio 3 year AA spreads over G-Sec FY 13 Fy 14 FY 15 FY 16 FY 17 FY 18 Source: CRISIL, Bloomberg. Data as on 25 th May May-15 May-16 May-17 May-18 21

22 Our multi-asset product suite An Aggressive Hybrid Fund, complementing the Axis Product Bouquet AXIS REGULAR SAVER FUND AXIS TRIPLE ADVANTAGE FUND AXIS EQUITY SAVER FUND AXIS DYNAMIC EQUITY FUND AXIS EQUITY HYBRID FUND Axis approach not only focuses on potential growth but also aims to protect downside Category Conservative Hybrid Fund Multi Asset Allocation Equity Savings Dynamic Asset Allocation Aggressive Hybrid Fund Equity Allocation Static Static Static Dynamic Static Current Equity Allocation 24% 76% 42% 48% (65-80%)^ Volatility^ (1 year) 3.5% 5.5% 4.8% 5.3% - Erstwhile Axis Income Saver Fund. ^Based on asset allocation in SID. Data as on 30 th June ^Volatility is the standard deviation based on daily returns for last 1 year. 22

23 Simulated index performance with risk measures Asset allocation targets risk adjusted returns STOCKS BONDS 70% STOCKS + 30% BONDS Return 16.5% 6.9% 14.2% Risk 18.5% 2.1% 13.0% Stocks: Nifty 50 TRI Index, Bonds: Crisil Composite Bond Fund Index;. Source: Axis Internal Analysis. Past performance may or may not be sustained in future. Index values are normalized to

24 Features at a Glance NAME TYPE BENCHMARK Axis Equity Hybrid Fund An open ended hybrid scheme investing predominantly in equity and equity related instruments CRISIL Hybrid Aggressive Index* FUND MANAGER EXIT LOAD MINIMUM APPLICATION AMOUNT Shreyash Devalkar & Ashish Naik (Equity), R Sivakumar (Debt) If redeemed/switched out on or before 12 months from the date of allotment: - For 10% of investment: Nil - For remaining investment: 1% If redeemed/switched out after 12 months from the date of allotment: Nil Rs. 5,000 and in multiples of Re. 1/- thereafter Minimum Additional Purchase Amount of Rs.100 and in multiples of Re. 1/- thereafter * Erstwhile called as CRISIL Balanced Fund Index 24

25 Special Feature : Automatic Encashment Plan Illustration: Investment Amount 10 lacs Monthly Automatic Encashment Rs 7000 Tenor 24 months XIRR (assumed) 6.5% WHAT is AEP? This feature aims to provide a tax efficient option for regular income Total Withdrawal 1,68,000 *Total Capital Gains Tax Paid Rs 1,800 DIVIDEND OPTION Amount of dividend is at fund manager s discretion Flexibility of dividend declaration is with fund manager Taxed at 10% (DDT) AEP FACILITY Amount of monthly cashflow is pre decided by the investor Pre defined frequency of monthly withdrawal Capital gain tax proportionate to the amount of withdrawal HOW does it Investors can redeem a fixed percentage of the investment value on a monthly basis WHY choose this option? Investors looking for regular cash flow can consider Automatic Encashment Plan as an added feature under the scheme Past performance may or may not be sustained in future. Please refer to SID for detailed information on the above feature. *Tax paid is if redeemed before 1 year if redeemed after 1 year as the invested fund is assumed to be an equity fund Tax is calculated excluding cess and surcharge # Dividend distribution tax calculation for illustration purpose only, had the client withdrawn using a dividend option instead of AEP option ^ Dividend distribution tax is the rate applicable for individuals in an equity fund. Benefit of Indexation is not considered for calculation of capital gains amount in the above example. Dividend distribution tax calculation for illustration purpose only. The tax calculation assumes payout of the amount as dividend by Schemes. Declaration of dividend is subject to discretion of Trustee. As such there cannot be any assurance given on rate of dividend or on frequency for declaration of dividend. The information set out above is included for general information purpose only and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her own tax consultant. Please consult your legal /tax advisor before making an investment 25

26 Market Update 26

27 Indian economy entering a productive growth phase GDP (%) Forex reserves (US$m) 460, , , , , , IMF Forecast Fiscal deficit (% GDP) Current account deficit (% GDP) Source: Bloomberg, IMF (International Monetary Fund), Axis AMC Internal Analysis. Data as on 25 th May

28 Government initiatives on inclusion, digitisation path breaking JAM trinity can transform the lifestyles of common citizens Mn of Bank A/cs opened under PMJDY Aadhaar Assigned (mn) Aadhaar penetration FY14 FY15 FY16 FY17 FY18 YTD % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Total Data Subscribers (mn) UPI Transactions Amount (Rs bn) FY13 FY14 FY15 FY16 FY17 FY18 YTD Source: PMJDY, UIDAI, Company data, TRAI, IDC, NPCI, Morgan Stanley Research, 0 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 28

29 We are seeing initial signs of capex revival Demand is making a comeback; synchronous recovery of consumption and exports should help lift capacity utilization Recovery in capex cycle evident in order books Improvement in Capacity Utilisation 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% Dec-08 Jun-10 Dec-11 Jun-13 Dec-14 Jun-16 Dec-17 Order Book, Quarterly Order Inflows, Trailing 4-Quarter sum 82% 79% 76% 75% 74% 72% FY13 FY14E FY15 FY16E FY18 FY19E Source: Morgan Stanley. Data as on 30 th June

30 Consumption indicators are strong, with improved exports growth Urbanization with rural overlay supported by government reforms is expected to push growth Vehicle production in India ( 000 units) 2W/CW Sales - Robust 30,231 Two Wheeler Sales Passenger Car Sales 24,169 39% 29% YoY% YoY% 3MMA 25% YoY% YoY% 3MMA 15% 19% 10,000 4,010 2, Passenger Vehicles Commercial Vehicles 2&3 Wheelers FY 18 FY 21E 9% -1% -11% -21% May-12 May-14 May-16 May-18 5% -5% -15% -25% May-12 May-14 May-16 May-18 Source: Morgan Stanley. IBEF Data as on 30 th June

31 Earnings growth is likely to stabilise post recent disruptions Corporate sector is at the cusp of a significant earnings recovery in the coming quarters Nifty Forward P/E Nifty Earnings Growth 25% 20% 21% 20 15% 14% 18 10% 7% 10% 8% 16 5% 3% 14 0% 12-5% -4% 10 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17-10% FY 13 FY 14 FY 15 FY 16 FY 17 FY 18CL FY 19CL Source: Bloomberg, CLSA, CL CLSA estimate. Data as on 31 st May

32 Market outperformance has narrowed to only few performing stocks & sectors Market is moving back to fundamentals versus hope Return Range CY 2017 YTD 18 No of stocks Less than -10% Between -10% and 0% Up to 10% Above 10% Source: Bloomberg. Data as on 30 th June

33 Interest in mid and small caps has waned in last few months Prefer large caps in the current scheme of things month 3 month 1 year NIFTY 50 Index NIFTY Midcap 100 Index NIFTY Smallcap 100 Index Source: Morgan Stanley. Data as on 2 nd July

34 Very few companies are able to sustain long term growth Of the 613 companies, listed for 20 years from 1997 to 2017, only 87 companies had Price CAGR > 25%. Likewise, only 89 companies managed Profit CAGR > 25% Price CAGR No of companies % of total <= 0% 41 7% 0 15% % 15 25% % 25 35% 70 11% > 35% 17 3% Total % Profit CAGR No of companies % of total <= 0% % 0 15% % 15 25% % 25 35% 32 5% > 35% 57 9% Total % Source: Motilal Oswal, Axis AMC Analysis Past performance may or may not be sustained in future. Data as on 31 st Dec

35 OUR APPROACH EQUITY KEY PILLARS OF OUR INVESTMENT APPROACH Axis is a bottom-up investor that focuses on fundamental research driven investing Our philosophy is focused on identifying quality companies that have a sustainable medium to long term growth potential run by capable managements Look for quality businesses Growth biased focusing on sustainable AMELIA PEARCY growth Designer Aim to deliver superior risk adjusted returns High conviction investors 35

36 What do we mean by quality businesses? Bottom-Up approach with 2-3 year view looking for Strong corporate governance/stro ng promoter pedigree Strong business model, which demonstrates its pricing power in the product category and the business it is in, and ultimately Secular growth rate of the sector, which is anywhere around 1.5 to 2x of GDP; Good ROE s and cash flows Source: Axis 36

37 Identifying Quality Companies Quantitative Factors Strong Return Metrics Stable Cash Flow High profitability, low debt-to-equity and earnings consistency Quality Beats The Broader Market S&P BSE Quality (TR) 19.21% S&P BSE 500 (TR) 10.21% Qualitative Factors Strong management pedigree Transparency of operations for investors and key stakeholders Credible oversight committees & strong internal controls Sustainable long term business model Mar-08 Mar-10 Mar-12 Mar-14 Mar-16 Mar-18 S&P BSE Sensex (TR) S&P BSE 500 (TR) S&P BSE 100 (TR) 9.76% S&P BSE Sensex (TR) 9.33% S&P BSE 100 (TR) S&P BSE Quality Index (TR) Source: Asia Index Private Limited. Data as on 31st March Past performance may or may not be sustained in the future. All returns are calculated on a compound annual growth rate basis and on total return values which incorporate effects of corporate actions in the underlying constituents. All values normalized to

38 Quality stocks are consistent outperformers High ROE Company Performance Company ROE % 5 Yr CAGR Page Industries Maruti Suzuki Bajaj Finance Motherson Sumi Systems Shree Cement HDFC Bank Asian Paints TCS Low ROE Company Performance Company ROE % 5 Yr CAGR DLF Tata Power Co Bharti Airtel Bank of Baroda BHEL NHPC Ltd State Bank Of India Oil & Natural Gas Corporation Source: Bloomberg, Axis AMC Internal Research. Data for the period 31st March 2013 to 31st March Past performance may or may not be sustained in the future. Stocks mentioned may or may not be part of schemes of Axis Mutual Funds. Refer disclaimers at the end of the document. The stocks mentioned should not be construed as recommendations by Axis Asset Management Company or Axis Mutual Fund. The data provided above is solely for illustration purposes only 38

39 Corrections have never been permanent Yearly returns between Less than -20% annual returns Years following the worst and less -20 to 0 0 to to to Source: MFI, Data from Dec'80 - Dec'17, Returns are compounded annualized. Data based on yearly rolling of S&P BSE Sensex Index. Past performance may or may not be sustained in future. 39

40 Markets have rewarded long term investors Rolling returns of Sensex ( ) Source: MFI, Data from Dec'80 - Dec'17, Returns are compounded annualized. Data based on yearly rolling of S&P BSE Sensex Index. Past performance may or may not be sustained in future. 40

41 Product Label, Statutory Details and Risk Factors 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). 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 Rs. 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. This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. 41

42 Thank You