Axis Capital Builder Fund Series 1 (1540 days) A close ended equity scheme investing across large cap, mid cap, small cap stocks. 1
Budget Highlights Fiscal Deficit for FY 2017-18 at 3.5% of GDP. FY 2018-19 estimate at 3.3%. India is the 7 th largest economy in the world with a GDP of US$ 2.5 Trillion. The country is expected to grow at 7.2% for H2 FY 18 Manufacturing growth and exports have seen a steady uptick. The government foresees a steady jump in GDP growth going forward. Introduction of a National Health Protection Scheme to cover over 10 crore poor & vulnerable families for secondary and tertiary care hospitalization. Costs not detailed. Increase of institutional farm credit for the agricultural sector to Rs. 11 lakh crore in FY18-19 Introduction of Long Term Capital Gains on listed equity shares and units of equity oriented funds over Rs. 1 lakh @10%. Capital gains accrued up to Jan 31 st 2018 will be grandfathered.* Source: Axis AMC Internal Analysis. Union Budget 2018 Documents *The information set out above is included for general information purposes only and does not constitute legal or tax advice. The finance bill 2018 is yet to receive presidential assent. Considering the individual nature of taxation, each investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in this scheme. 2
Budget Key Takeaways Prudent Fiscal Management Divestment & Direct Taxes support government finances. Fiscal deficit for FY 18 at 3.5% Divestment target for FY 19 at Rs 80,000 Cr Agriculture & Rural Aim to improve rural livelihoods through budgetary support of Rs 14 lakh crore Emphasis on improving farm income through market linked MSP`s & food subsidy Infrastructure Focus on Roads, Railways, Ports and rural Infra Key projects include Mumbai Suburban rail upgrade, Bangalore Suburban Rail and border roads Personal Wealth Introduction of Long Term Capital Gains on listed equity shares and units of equity oriented funds Special concessions for senior citizens Source: Axis AMC Internal Analysis. Union Budget 2018 Documents 3
Time in the market is more important than Timing the market. Markets always react to short term events in a knee jerk reaction and revert back to their fundamental valuations once the event is analysed. This has repeated several times in the past. 35,000 30,000 25,000 20,000 15,000 Dot Com Bubble, 9/11 Twin Tower attacks Congress wins national elections, Sensex & NIFTY 50 flash crash S&P BSE Sensex Euro Crises, PIIGS Default LTCG re-introduced Demonetisation & US Presidential Elections 10,000 Ketan Parekh China Meltdown Scam US loses AAA 5,000 rating 0 Sub Prime Crises Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18 Corrections offer suitable entry points for long term investors. So long as fundamentals remain positive, markets will follow the general trajectory of the economy. Hence, Corrections Are Good! Source: Bloomberg, Axis MF Research. Since April 1979 till December 2017 Past performance may or may not be sustained in future. 4
Key themes to play Rural India Infrastructure Source: Axis AMC Internal Analysis. 5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017RE 2018BE Rural India A Land of Opportunity! More than 80% of India`s population lives in rural India Govt s rural spending has gone up over the past few years (Rs bn) 985 1,086 Improving trend in real rural wage growth is directly encouraging for rural consumption outlook and indirectly for the aggregate demand and for the investment cycle. 627 624 814 709 571 646 731 792 Impacted sectors: 262 339 Rural Housing Rural Infrastructure Rural Finance Any other sector that has an edge over peers due to rural aspects 5.0 3.0 1.0-1.0 Rising food prices is helping the terms of trade in favor of Indian farmers 2.6 2.0 1.4 2.4 2.5 1.3-0.2-1.2 0.4 2.0 1.8 2.3-3.0 Nov-16 Feb-17 May-17 Aug-17 Nov-17 4.4 4.9 Source: Budget 2018 documents, Kotak Institutional Equities. Deutsche Bank, CMIE, Axis MF Internal Analysis 6
Infrastructure Sector # of Projects Cumulative Expenditure (US$) Roads & Highways 91 8.7 bn Power 73 16.6 bn Petroleum 65 19.5 bn Railways 33 3.8 bn Steel 20 8.1 bn Shipping & Ports 20 1.8 bn Telecommunications 14 463.6 mn Coal 9 2.3 bn Fertilizers 6 596.2 mn Civil Aviation 5 861.2 mn Urban Development 5 678.8 mn Atomic Energy 1 168.9 mn Robust demand India requires Rs 50 tn investment in infra by 2022 for sustainable development Improved logistics In 2016, India jumped 19 places in World Bank's Logistics Performance Index, to rank 35/160. Attractive opportunities Only 24% of National Highway network in India is four-lane Foreign Flows Increasing impetus to develop infrastructure is attracting foreign players Policy Support Push for rural development, Housing for All, Smart Cities Mission and UDAY Scheme giving support Source: ibef.org, Ministry of Statistics and Programme Implementation (MoSPI) 7
Indian Economy Key Drivers 8
India s macro conditions On the Path to Renewed Growth Improving Fiscal situation despite policy headwinds 6.0 6.3 4.9 5.9 4.9 4.5 4.1 3.9 as a % of GDP 3.5 3.5 3.2 The government has maintained the fiscal deficit despite shortfall in non-tax revenues and front loading critical expenditure. Further gradual consolidation is likely going forward FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17RE FY 18BE FY 19E 8 Real GDP Growth (%) 7.5 7.5 Further recovery in growth likely, given a conducive global growth backdrop and stabilisation in domestic demand post GST shock 7.1 6.75 FY 15 FY 16 FY 17E FY 18E FY 19E Source: Bloomberg, CLSA Axis MF Research 9
Capex indicators showing an improving trend Demand for building materials has seen a steady uptick signaling early signs of on ground activity in the infra space. Capex largely driven by public spending; Private investment likely to improve going forward Union budget re-iterates the government focus on infrastructure. Rural infrastructure spending increased by 30% Expect higher rural incomes, rising employment and higher rural demand Rising Cement Production 16% 12% YoY% YoY% 3MMA 8% 4% 0% -4% -8% -12% -16% Nov-15 May-16 Nov-16 May-17 Nov-17 19% 14% 9% 4% -1% Improving Steel Demand & Production Steel Demand YoY%, 3MMA -6% Dec-15 May-16 Oct-16 Mar-17 Aug-17 MMA Monthly Moving Average. Source: Bloomberg, Morgan Stanley, Axis MF Research 10
Which has led to improving economic activity 58 Services PMI Manufacturing PMI 50% MHCV, YoY, 3MMA, LS LCV, YoY, 3MMA, RS 21% 56 54 52 50 48 46 53.1 Expansion Contraction 54.7 50.9 40% 30% 20% 10% 0% -10% -20% -30% 11% 1% -9% -19% 44 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17-40% -29% Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Source: Markit IHS, SIAM Axis MF Research 11
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 E FY19 E FY20 E FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E and Improving Sentiment Improving Rural Sentiment Improving Urban Discretionary Spending 12 10 8 6 4 2 0-2 -4 11.6 (0.5) 0.7-7.9 26.0 11.5 2.9 0.7 11.0 3.2 30.0 25.0 20.0 15.0 10.0 5.0 0.0-5.0-10.0 30% 25% 20% 15% 10% 5% 0% -5% -10% 10.2% 7.7% 7.1% -2.5% 28.2% 3.5% 12% 10% 8% 5.8% 6% 7.5% 4% 2% 0% -2% -4% Real rural wage growth, % Two Wheeler Growth Passenger Vehicle Growth Real Urban wage growth, % 73 78 92 FY01-08: 21% 131 169 184 Improving Earnings Growth (NIFTY 50 EPS) 236 281 251 247 315 FY08-17: 4.7% CAGR 348 369 407 415 399 421 FY17-20E: 18.9% CAGR 487 598 708 Source: Bloomberg, Spark Capital, Motilal Oswal, SIAM, Axis MF Research Past performance may or may not be sustained in future. 12
Valuations are relatively high; earnings growth kicking in will help 23 NIFTY 50 Forward P/E 21 19 17 Average 16.1 15 13 11 9 7 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Nifty Best P/E Average Source: Bloomberg, P/E Price to Earnings 13
Asset allocation adds value in high valuation environment PE Bucket Nifty PE (Average) Nifty 50 Return (Average) 65:35 Strategy Return (Average) Very High 23.8-0.9% 2.7% High 20.7 7.1% 8.2% Moderate 18.1 13.3% 12.1% Low 14.5 29.3% 21.4% Total 14.3% 12.5% Source: Bloomberg, MFI Explorer. 65:35 Strategy is 65 equity (Nifty 50 Index) + 35 debt (CRISIL Composite Bond Fund Index). The data has been collated from Jan 1999 to Dec 2017 for a 3 year return. Past performance may or may not be sustained in future. 14
Axis Capital Builder Fund Series 1 (1540 days) A Close Ended Equity Scheme Investing Across Large Cap, Mid Cap, Small Cap Stocks 15
Stock Selection Bottom up approach to investing Follow the Key pillars of Axis approach to investing which are Growth biased - focusing on sustainable growth Look for quality businesses Aim to deliver superior risk adjusted returns High conviction Investing Disciplined investment process which is clearly articulated & focused on risk mitigation Concentrated yet diversified portfolio of best ideas generated from in-depth research and articulated investment strategy Total no of listed companies available for trade (over 4000) No of companies in Axis Universe (around 350) No of companies in the fund (Typically around 30-40) Source: BSE India (http://www.bseindia.com/), Data as on 31 st Jan 2018. The above mentioned numbers are indicative. The portfolio allocation will be based on the prevailing market conditions and is subject to change depending on the fund management view. The scheme will invest as per the overall investment objective & strategy in scheme information document. 16
Fund Construct Aims to generate income and long term capital appreciation by investing in a diversified portfolio of equity & equity related instruments across market capitalization. The fund may also use derivative strategies to manage volatility dynamically The debt component will be invested across the credit spectrum with an accrual strategy over the tenure of the fund. Equity & Equity Related Instruments Net Equity* 65 85% Debt & Money Market Instruments 80-100% Hedged Equity* 0 15% 0-20% *The above mentioned allocations are indicative. The portfolio allocation will be based on the prevailing market conditions and is subject to change depending on the fund management view. The scheme will invest as per the overall asset allocation mentioned in scheme information document. 17
Equity Investment Approach High quality portfolio with mid to high growth than benchmark Intend to have Large cap* 50% while the rest in mid and small cap. Investment Themes Core portfolio in domestic consumption based names while rest in cyclical/event based stocks Rural Consumption Infrastructure Benchmark agnostic while being diversified reducing concentration risk The above mentioned numbers are indicative. The portfolio allocation will be based on the prevailing market conditions and is subject to change depending on the fund management view. The scheme will invest as per asset allocation mentioned in scheme information document. * Large Cap: Top 100 stocks in Nifty 500 Index as per market cap 18
Fixed Income Approach Primary investments in short to medium term corporate bonds Can invest across the credit spectrum Can invest across the yield curve 19
Why Axis Capital Builder Fund Series 1 (1540 days)? Offers ideal mix of simplified asset allocation and long term wealth creation Long term orientation for both investors and fund manager No liquidity pressure on the portfolio Ideal for long term investors looking for portfolio diversification across asset classes 20
Quick Glance at features Scheme Name Type Benchmark Axis Capital Builder Fund Series 1 (1540 days) A close ended equity scheme investing across large cap, mid cap, small cap stocks. NIFTY 500 Index NFO Period February 16, 2018 to March 1, 2018 Fund Manager Ashish Naik & Anupam Tiwari Investment approach Buy & Hold Strategy: Aim to invest in companies that can deliver substantial growth over medium to long term period. No of stocks* Typically around 30-40^ ^The above mentioned numbers are indicative. The portfolio allocation is based on the prevailing market conditions and is subject to change depending on the fund management view. The scheme may invest as per investment objective & strategy in scheme information document. 21
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. 22
Thank You 23