FIXED INCOME UPDATE 1

Transcription

1 1 FIXED INCOME UPDATE

2 Abstract Rates are headed down on lower inflation Inflation is likely to hit the RBI s disinflationary path Bond yields may further fall on continuation of rate cuts Macro conditions have improved Twin-deficits under control Currency stable, FX reserves higher Effect of US rate reversal unlikely to be disruptive 2

3 ACTUAL TARGET Inflation back in RBI s comfort zone WPI CPI % 6% 6.5% 5.5% 8.0% 6.0% 4.0% 9.68% 7.69% 5.65% 6.0% Currently 5.11 %* Might 3 Source of data: RBI Monetary Policy Documents, Bloomberg, *(for Jan 15)

4 Lower inflation creating room for further rate cuts RBI will seek to bring the inflation rate to the mid-point of the band of 4 +/- 2 per cent provided for in the agreement, i.e., to 4 per cent by the end of a two year period starting fiscal year From the statement by RBI Governor on Monetary Policy, 4 th March % 11% CPI Inflation Repo Rate 10% 9% 8% 7% 6% 5% 4% Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan % 4 Source of data: Bloomberg, Statement by Dr. Raghuram G Rajan, Governor on Monetary Policy on 4 th Mar 2015

5 Real rates have turned positive will improve savings rate 1 year FD less CPI inflation 5 Source of data: Bloomberg., 1 year FD considered is SBI 1 year FD

6 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Lower oil, commodities prices will help macro Brent Crude Oil prices (USD) S&P GS Commodity Index (USD) Low commodity prices helping current account deficit to ease 6 Source: Bloomberg

7 Attractive yields leading to massive foreign flows FII inflows in debt (US$ mn) 30,000 25,000 20,000 15,000 10,000 5,000 - (5,000) (10,000) (15,000) CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 (YTD) 7 Source of Data: Bloomberg.

8 Yields have moved down across the curve 10.0% 9.5% 1 year back 9.0% 8.5% 6 months back 8.0% 7.5% Current 7.0% CBLO 1Y 2Y 3Y 4Y 5Y 10Y Source of data: Bloomberg. Current: 27 th Feb 2015, 6 months back :28 th Aug 2014, 1 year back: 28 th Feb

9 Returns Duration outperforms credit during rate cut cycles Repo Rate Duration 31% 2% 16% -7% 16% Credit 20% 7% 12% 6% 12% Jul'08- May'09 May'09-Nov'11 Nov'11-May'13 May'13- Jan'14 Jan'14-Mar 15* 9 Duration: 10 yr G-Sec, Credit: 3 year AA Corp Bond, Source: Bloomberg, Axis MF Analysis, * As on 4 th Mar 2015

10 US rate hikes not likely to be disruptive for local markets yr G-Sec Yield (%) US Fed Funds Target Rate (%) Repo Rate (%) Source of Data: Bloomberg.

11 Summary Continuation of rate cuts can support further fall in bond yields across the curve leading to rising bond prices, the trend can continue over the medium term Investors should look at investments in products that can participate in this trend Investors with shorter horizon (6-12 months) and/or lower risk appetite should consider Axis Short Term Fund and Axis Fixed Income Opportunities Fund Investors with longer horizon (beyond 12 months) and looking for absolute returns should look at Axis Dynamic Bond Fund and Axis Income Fund 11

12 12 Fixed Income Funds

13 Returns We offer a tight basket of clearly positioned fixed income funds Axis Income Fund Axis Constant Maturity 10 Year Fund Axis Short Term Fund Axis Liquid Fund Axis Treasury Advantage Fund Axis Banking Debt Fund Duration Risk 13 Portfolio maturity is based on the prevailing market conditions and is subject to changes depending on the fund manager s view of the fixed income markets.

14 Fund positioning Axis Treasury Advantage Fund Positioning Current YTM Portfolio Maturity Portfolio Volatility Recommended Min Investment Horizon Liquidity Management 8.78% 120 days Low 1 month Axis Short Term Fund Axis Fixed Income Opportunities Fund Regular income 8.60% 3.0 yrs Medium 6 months Regular Income 8.89% 4.1 yrs Medium 6 months Axis Income Fund Axis Dynamic Bond Fund Axis Constant Maturity 10-Year Fund Income with potential for MTM Income with potential for MTM Replicate passive 10 year maturity 8.10% 11.5 yrs High 1 Year 8.04% 12.2 yrs High 1 Year 7.72% 10.4 yrs High 1 Year 14 Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets.

15 15 Axis Fixed Income Opportunities Fund

16 Narrowly defined funds get affected by the market cycle Higher Rated Short Term Funds Lower accrual rates Income Funds High duration risk Lower rated Credit Funds High Credit Risk Axis FIOF Advantage Balanced strategy that dynamically allocates across segments with a controlled risk budget 16 Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. High Rated short term funds are those which invest in instruments which are rated AAA/A1+ & equivalent or G-sec. Lower rated credit funds are those which invest in instruments which are rated below AAA/A1+ & equivalent. Axis FIOF refers to Axis Fixed Income Opportunities Fund

17 Axis Fixed Income Opportunities Fund : Positioning Aims for improved performance by Capturing opportunities across accrual, credit and duration Controlled risk by Maintaining duration within 3 years* Current Portfolio Mix Accrual 40-45% Portfolio Characteristics Average Maturity 4.1 years Credit 25-30% Modified Duration 2.9 years Duration 20-25% Yield to Maturity^ 8.89% *Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. 17

18 Portfolio Strategies - Summary Accrual Credit Duration Portfolio Role Core Core Tactical Description Money market and short term debt Below AAA and up to A rated issuers Dynamic based on market outlook Impact Primarily Accrual, with some MTM Accrual, with some MTM Absolute return Typical Allocation Range 40-80% 20-30% 0-30% Current Allocation 40-45% 25-30% 20-25% Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. 18

19 19 Axis Short Term Fund

20 Axis Short Term Fund High quality & low-risk strategy Capture opportunities in the short term segment Medium term horizon Average Maturity Modified Duration Portfolio Characteristics 3.0 Years 2.2 years Yield to Maturity^ 8.60% Average for the last 1 year Allocation to High Rated Papers# 84.0% Allocation to G-Sec 11.2% Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. ^The yield to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the returns that maybe generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested corpus. #High Rated Papers refers to instruments which are rated AAA/A1+ & equivalent or G-sec 20

21 % of Net Assets Average Maturity (years) Dynamically managed short duration fund 100% 90% 80% Asset Allocation Mix & Average Maturity Money Market Instruments G-Sec % 3 60% 50% 40% 30% % 1 10% Corporate Bonds 0% 0 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Average Maturity (years) 21 Source of data: ACEMF. Fund above is Axis Short Term Fund

22 Performance as on 31st Dec 2014 Return Period Axis Short Term Fund Growth (%) Crisil Short Term Bond Fund Index* (%) Crisil 1 Year T-Bill Index ** (%) Dec 11 Dec Dec 12 Dec Dec 13 Dec Since Inception Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. Since inception returns are calculated on Rs. 10 invested at inception. Date of Inception: 22 nd January Direct plan returns are from 1 st January Devang Shah is the fund manager. Devang Shah managed 18 schemes. Please refer to annexure for performance of all schemes managed by the fund managers. Current value of Investment if Rs. 10,000 was invested on inception date Rs. 14,772, Crisil Short Term Bond Fund Index: 14,679 & Crisil 1 Year T-Bill Index: Rs. 13,570; Direct Plan: 12,000, Crisil Short Term Bond Fund Index: 11,955 Crisil 1 Year T-Bill Index: 11,487, * Benchmark, ** Additional Benchmark

23 23 Axis Dynamic Bond Fund

24 Axis Dynamic Bond Fund Invests in best ideas Dynamically allocates across all segments Active duration management Portfolio Characteristics Average for the last 1 year Average Maturity Modified Duration 12.2 years 7.0 years Yield to Maturity^ 8.04% Allocation to High Rated Papers# Allocation to G- Sec 94.0% 55.2% Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. ^The yield to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the returns that maybe generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested 24 corpus. #High Rated Papers refers to instruments which are rated AAA/A1+ & equivalent or G-sec

25 % of Net Assets Average Maturity (years) Dynamically managed maturity profile 100% 90% 80% 70% Money Market Instruments Asset Allocation Mix & Average Maturity % 50% G-Sec 8 40% 6 30% 4 20% 10% Corporate Bonds 2 0% Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 0 Average Maturity (years) 25 Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. Source of data: ACEMF. Fund above is Axis Dynamic Bond Fund

26 Performance as on 31st Dec 2014 Return Period Axis Dynamic Bond Fund Growth % Crisil Composite Bond Fund Index (Benchmark) % Dec 11 Dec Dec 12 Dec Dec 13 Dec Since Inception Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. Since inception returns are calculated on Rs. 10 invested at inception. Date of Inception: 27 th April Direct Plan return is calculated from 1 st January R. Sivakumar & Devang Shah are the fund managers. R. Sivakumar manages 2 schemes & Devang Shah manages 18 schemes. Please refer to annexure for performance of all schemes managed by the fund managers. Current value of Investment if Rs. 10,000 was invested on inception date Rs. 13,908, Crisil Composite Bond Fund Index: 13,637; 26 Direct plan: 12,251 Crisil Composite Bond Fund Index: 11,840, * Benchmark

27 27 Axis Income Fund

28 Axis Income Fund Active Management Suitable for a falling interest rate environment Modified duration in the range of 2 to 7 years Portfolio Characteristics Average Maturity 11.5 years Modified Duration 6.8 years Yield to Maturity^ 8.10% Average for the last 1 year Allocation to High Rated Papers# 88.1% Allocation to G-Sec 63.3% Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. ^The yield to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the returns that maybe generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested corpus. #High Rated Papers refers to instruments which are rated AAA/ A1+ & equivalent or G-sec. 28

29 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 % of Net Assets Average Maturity (years) Active management of duration within a range 100% 90% 80% 70% Money Market Instruments Asset Allocation Mix & Average Maturity % 50% 40% 30% G-Sec % 10% Corporate Bonds 2 0% 0 Source of data: ACEMF. Fund above is Axis Income Fund Average Maturity (years) 29

30 Performance as on 31st Dec 2014 Return Period Axis Income Fund Growth % Crisil Composite Bond Fund Index (Benchmark) % Crisil 10 Year Gilt Index (Additional Benchmark) Dec 12 Dec Dec 13 Dec Since Inception Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. Since inception returns are calculated on Rs. 10 invested at inception. Date of Inception: 27 th April Direct Plan return is calculated from 1 st January R. Sivakumar & Devang Shah are the fund managers. R. Sivakumar manages 2 schemes & Devang Shah manages 18 schemes. Please refer to annexure for performance of all schemes managed by the fund managers. Current value of Investment if Rs. 10,000 was invested on inception date Rs. 12,987, Crisil Composite 30 Bond Fund Index: Rs. 12,713, Crisil 10 Year Gilt Index: Rs. 12,337; Direct plan: Rs. 12,171 Crisil Composite Bond Fund Index: Rs. 11,790, Crisil 10 Year Gilt Index: Rs. 11,210 * Benchmark

31 31 Fixed Income Funds - Snapshot

32 Fixed Income Offerings - Snapshot Features Axis Liquid Fund Axis Banking Debt Fund Axis Constant Maturity 10 Year Fund Axis Short Term Fund Primary Asset Class^ Money Market Instruments <91 days Primarily in Bank CDs G-Sec Short Term Debt & Money Market Instruments Average Maturity 27 days 357 days 10.4 yrs 3.0 yrs Modified Duration 27 days 342 days 6.8 yrs 2.2 yrs Yield to Maturity (%)* Asset Mix Rating Mix 8.39% 8.68% 7.72% 8.60% Money Market Instruments: 100% Sovereign/ AAA & equivalent$: 100% Money Market Instruments: 100% AAA & equivalent$: 100.0% G-Sec: 100% Sovereign: 100.0% Corporate Bond: 53% Money Market Instruments: 28% G-Sec: 19% AAA & equivalent$: 83% AA: 7% AA+: 7% AA-: 3% Exit Load Nil Nil Nil 0.25% if redeemed / switched - out within 1 month from the date of allotment (wef 17th Sep 2014) Why Invest? Cash Management Short term fund with high quality portfolio To target a specific duration Actively Managed Short Duration Fund with Daily Liquidity$ $ AAA & Equivalent includes AAA/A1+-rated papers. ^Note: Allocation & duration is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. *The yield to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the returns that maybe generated by the fund and the securities 32 bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested corpus.

33 Fixed Income Offerings - Snapshot Features Primary Asset Class^ Axis Treasury Advantage Fund Money Market & Short Term Debt Instruments Axis Fixed Income Opportunities Fund Across all fixed income instruments such that the portfolio duration is within 3 yrs Axis Income Fund Primarily long dated Corporate Bonds & G-Sec Axis Dynamic Bond Fund Across all fixed income instruments Average Maturity 120 days 4.1 yrs 11.5 yrs 12.2 yrs Modified Duration 114 days 2.9 yrs 6.8 yrs 7.0 yrs Yield to Maturity (%)* 8.78% 8.89% 8.10% 8.04% Asset Mix Money Market Instruments: 79% Corporate Bond: 21% Corporate Bond: 51% Money Market Instruments: 27% G-Sec: 22% G-Sec: 69% Corporate Bond: 29% Money Market Instruments: 2% G-Sec: 67% Corporate Bond: 28% Money Market Instruments: 5% Rating Mix Exit Load Sovereign/ AAA & equivalent$: 84% AA: 8% AA-: 6% A+: 2% Nil Sovereign/ AAA & equivalent$: 70% AA: 13% AA-: 10% A+: 7% From the date of allotment, if redeemed/ switched out within 1 year: 1%, 1-2 years: 0.50% (w.e.f. 17 th Sep 2014) Sovereign/ AAA & equivalent$: 93% AA: 2 % AA-: 5% 1.00% if redeemed / switched - out within 12 months from the date of allotment (wef 1 st Jan 2015) Sovereign/ AAA & equivalent$: 94% AA+: 2% AA: 2% AA-: 2% 1% if redeemed / switched - out within 3 years from the date of allotment (wef 1 st Oct 2014) Why Invest? For spare cash in your Bank Account To capture opportunities across accrual, credit and duration space Active Management within a duration range suitable for a falling interest rate environment Go Anywhere Fund following a Best Ideas Approach $ AAA & Equivalent includes AAA/A1+-rated papers. ^Note: Allocation & duration is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. *The yield to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the returns that maybe generated by the fund and the securities 33 bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested corpus.

34 Annexure Annexure for returns of schemes managed by fund manager (as on 31 st Dec 2014) 34 Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. The above data excludes performance of all the schemes which have not completed a year.

35 Annexure Annexure for returns of schemes managed by fund manager (as on 31 st Dec 2014) 35 Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. The above data excludes performance of all the schemes which have not completed a year.

36 Annexure Annexure for returns of schemes managed by fund manager (as on 31 st Dec 2014) 36 Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. The above data excludes performance of all the schemes which have not completed a year

37 Annexure Annexure for returns of schemes managed by fund manager (as on 31 st Dec 2014) Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. The above data excludes performance of all the schemes which have not completed a year. W.e.f January 1st, 2013, Axis Treasury Advantage Fund Institutional Plan has been renamed Axis Treasury Advantage Fund. 37

38 Axis Dynamic Bond Fund This product is suitable for investors who are seeking * Optimal returns over medium to long term To generate stable returns while maintaining liquidity through active management of a portfolio of debt and money market instruments Low risk (BLUE) Axis Income Fund This product is suitable for investors who are seeking * Optimal returns over medium to long term Investment in a diversified portfolio of high quality debt and money market securities to generate optimal risk adjusted returns while maintaining liquidity Low risk (BLUE) Axis Banking Debt Fund This product is suitable for investors who are seeking * Regular income over short to medium term Investment in debt and money market instruments issued by banks Low risk (BLUE) Axis Short Term Fund This product is suitable for investors who are seeking * Regular income while maintaining liquidity over short to medium term Investment in debt and money market instruments Low risk (BLUE) Axis Constant Maturity 10 Year Fund This product is suitable for investors who are seeking * Credit risk free returns over medium to long term Investment mainly in Government securities to generate returns similar to that of 10 year government bonds Low risk (BLUE) Axis Treasury Advantage Fund This product is suitable for investors who are seeking * Regular income over short term Investment in debt and money market instruments Low risk (BLUE) Axis Fixed Income Opportunities Fund This product is suitable for investors who are seeking * Stable returns in the short to medium term Investment in debt and money market instruments across the yield curve and credit spectrum Low risk (BLUE) Axis Liquid Fund This product is suitable for investors who are seeking * Regular income over short term Investment in debt and money market instruments Low risk (BLUE) 38 *Investors should consult their financial advisors if in doubt about whether the product is suitable for them Note: Risk is represented as: (BLUE) investors understand that their principal will be at low risk (YELLOW) investors understand that their principal will be at medium risk (BROWN) investors understand that their principal will be at high risk

39 Axis Triple Advantage Fund This product is suitable for investors who are seeking * Capital appreciation & generating income over long term Investment in a diversified portfolio of equity and equity related instruments, fixed income instruments & gold Exchange Traded Funds Medium risk (YELLOW) Axis Income Saver This product is suitable for investors who are seeking * Capital appreciation while generating income over medium to long term Investment in debt and money market instruments as well as equity and equity related instruments while managing risk through active asset allocation Medium risk (YELLOW) Axis Gold ETF This product is suitable for investors who are seeking * Capital appreciation over medium to long term Investment predominantly in gold in order to generate returns similar to the performance of gold, subject to tracking error Medium risk (YELLOW) Axis Gold Fund This product is suitable for investors who are seeking * Capital appreciation over medium to long term Investment predominantly in Axis Gold ETF in order to generate returns similar to the underlying fund, subject to tracking error Medium risk (YELLOW) Axis Capital Protection Oriented Fund Series 1 to 5 This product is suitable for investors who are seeking * Capital appreciation with low risk of capital loss over medium to long term. Investment in debt and money market instruments as well as equity and equity related instruments Medium risk (YELLOW) Axis Hybrid Fund Series 1 to 7 This product is suitable for investors who are seeking * Capital appreciation while generating income over medium to long term Investment in debt and money market instruments as well as equity and equity related instruments Medium risk (YELLOW) 39 *Investors should consult their financial advisors if in doubt about whether the product is suitable for them Note: Risk is represented as: (BLUE) investors understand that their principal will be at low risk (YELLOW) investors understand that their principal will be at medium risk (BROWN) investors understand that their principal will be at high risk

40 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. Source of Data: Bloomberg, RBI, ACEMF Data as on 27 th Feb