Key highlights RBI surprised markets by not hiking rates; however changed the stance to calibrated tightening Repo Rate maintained by RBI at 6.50% Liquidity squeezed in money market Regulators come to rescue 6.6 6.5 6.4 6.3 6.2 6.1 6.0 5.9 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 10 year benchmark breached the 8% mark 8.5 10 year G-Sec Yield(%) 8 7.5 7 6.5 Sep-17 Dec-17 Mar-18 Jun-18 Sep- Source: Bloomberg, Axis Capital 2
Inflation continued to ease Slowing inflation in food prices, which make up nearly half of CPI, cancelled out price rises in imported goods stemming from the weakening rupee currency. Inflation numbers were also propped down by the high base effect same time last year. Inflation in target zone Source: Bloomberg, Axis Capital. CPI: Consumer Price Index. 3
AAA bonds have risen across the curve Shorter end of the curve has well priced in rate hikes offering carry cushion Key rates 1 st Aug 2018 5 th Oct 2018 Repo Rate 6.50 6.50 10 yr G-Sec 7.70 8.03 8.7% 7.7% AAA Yields (%) Oct/18 Dec/17 Sep/17 1 year CD 8.00 8.52 3 year AAA 8.30 8.82 6.7% 1 yr 2 yr 3 yr 5 yr 10 yr Source: Bloomberg, Axis MF Research, Reuters. 4
Prefer short end over longer end of the curve 200+ bps spread for 3 year AAA yields over repo rate Long end of the curve to be range bound 300 250 3 year AAA spread over Repo 8.3 8.1 7.9 10 year G-Sec Yield(%) 200 7.7 150 7.5 7.3 100 7.1 50 6.9 6.7 0 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 6.5 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Source: Bloomberg, Axis Capital 5
Key risk to watch Oil could play a spoil sport Share of oil in overall energy consumption for India is lower among most emerging markets. However, India is the thirdlargest consumer of oil in the world. Sensitivity analysis of oil price to key variables: Source: Bloomberg, Axis MF Research, CLSA. CPI: consumer price index, WPI: Wholesale Price Index, GDP gross domestic product, 6
Market View Summary With elevated rates, on a risk reward basis, the short end of the curve remains attractive as compared to long end of the curve 1-3 year corporate segment offer better opportunities with attractive spreads Long bonds are likely to trade range bound. Short tenor bonds look attractive from a risk reward perspective. Stay invested in short to medium term strategies and actively look at credit funds Source: RBI, Axis MF Research 7
Fund Positioning Positioned in short to medium term space An open ended debt scheme predominantly investing in AA and below rated corporate bonds (excluding AA+ rated corporate bonds) Typical maturity range of 2-4 years Core book (>70%) in corporate debt instruments while 20-30% is managed dynamically based on market conditions Aims to capture higher yields / spread compression in 2-4 year corporate bonds Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. Please refer to Scheme Information Document (SID) for detailed asset allocation and investment strategy. 8
Risk Management Tight Duration Range (3 years) Stringent credit review Control credit risk through diversification and strict limits on issuer weighting based on rating Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. 9
Highly Diversified Corporate Bond Portfolio With Tight Position Limits Top 10 Non- AAA exposures (Sep 18) Top 10 sub AAA holdings Rating Total Edelweiss Commodities Services Limited AA 4.4% PVR Limited AA- 3.8% Amri Hospitals Limited A+(SO) 3.6% Dalmia Cement (Bharat) Limited AA 3.2% Tata Power Company Limited AA 3.0% Zenith Trust A-(SO) 2.9% Birla Corporation Limited AA 2.6% Hinduja Leyland Finance Limited AA- 2.5% JSW Techno Projects Management Limited A(SO) 2.4% Renew Power Limited A+ 2.4% Top 10 Non-AAA constitute 30.7 percent of the portfolio Data is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. Please refer to the factsheet / visit www.axismf.com for full portfolio details of the scheme 10
Maturity Profile & Rating Transition Core allocation to short term corporate bonds across credit spectrum in 2-4 year space Reduced exposure to longer dated securities and shift to 1-3 year high rated and 18 36 months lower rated corporate bonds Rating June 18 Target Maturity Mix (Sep 18) 41% Sovereign/ AAA$ 29.3% 30-40% 33% 25% AA(+/-) 48.8% 50-60% A(+/-) 21.9% 10-20% 1% 0% 0-1 years 1-3 years 3-5 years 5-10 years >10 years Strategy followed & Target Range is based on the current market conditions and is subject to changes depending on the fund manager s view of the markets. $AAA & Equivalent includes AAA/A1+-rated papers. 11
Key upgrades & downgrades in the portfolio since inception Upgrades Edelweiss Commodities Limited (CRISIL AA- to CRISIL AA) IIFL Finance Limited (CRISIL AA- to CRISIL AA) Hinduja Leyland Finance Limited (CARE A+ to CARE AA-) Indiabulls Housing Finance Limited (CRISIL AA+ to CRISIL AAA) Solstice Trust (ICRA A(SO) to ICRA A+(SO)) Cholamandalam Investment & Finance Company Limited (ICRA AA to ICRA AA+) Yes Bank Limited CARE AA+ to CARE AAA (other rating ICRA AA+) Ess Kay Fincorp Limited CARE BBB+ to CARE A- (other rating IND A (SO)) Jubilant Life Sciences Limited CRISIL AA (earlier rated IND AA-) SREI Equipment Finance Limited CARE AA- to CARE AA Tata Capital & Tata Capital Housing : CRISIL AA+ to CRISIL AAA Solstice Trust : ICRA A+ to ICRA AA- Piramal Housing and Capital :ICRA AA to ICRA AA+ Aditya Birla Housing Finance :ICRA AA+ to ICRA AAA Jubilant Life Sciences: IND AA- to IND AA Downgrades Vodafone India (IND AAA to IND AA+) Tata Power Company Limited (ICRA AA to ICRA AA-) IDFC Bank Limited (IND AAA to IND AA+;other rating ICRA AAA) Source: ICRA, CRISIL. Past performance may or may not be sustained in future. 12
Performance as on 30 th Sep 2018 13
Annexure for returns of schemes managed by fund manager 34 14
Annexure for returns of schemes managed by fund manager 34 #Scheme Performance may not be strictly comparable with that of its additional benchmark in view of hybrid nature of the scheme. @@The performance data for 5 years period has not been provided for scheme/plan not in existence for 5 years. @The performance data for 3 years period has not been provided for scheme/plan not in existence for 3 years. The performance of the scheme is benchmarked to the Total Return variant of the Benchmark Index (TRI) in terms of SEBI circular dated Jan. 4, 2018. Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. Since inception returns are calculated on Rs.2026.8384/- for Gold ETF & Rs.10/- for all other schemes. Different plans have different expense structure. Plan of the scheme for which performance is given is indicated above. The above data excludes performance of Fixed Maturity Plans and all the schemes which have not completed a year. Top 3 and Bottom 3 schemes (based on 1 year performance) managed by Devang Shah has been provided herein. Devang Shah is managing Axis Liquid Fund, Axis Dynamic Bond Fund, Axis Gilt Fund, Axis Strategic Bond Fund and Axis Short Term Fund and all Axis Hybrid Funds since 5th November 2012 (since inception date for Axis Hybrid Funds launched after 5th November, 2012), Axis Credit Risk Fund and Axis Arbitrage Fund since inception and Axis Treasury Advantage Fund and Axis Regular Saver Fund (Debt portion), Axis Gold Fund, Axis Gold ETF, all Axis Fixed Term Plans since 7th June, 2016 (since inception date for Axis Fixed Term Plans launched after 7th June, 2016) and Axis Corporate Debt Fund since July 13th, 2017. 15
Product Labelling Fund Name Riskometer Product Labelling Axis Credit Risk Fund (An open ended debt scheme predominantly investing in AA and below rated corporate bonds (excluding AA+ rated corporate bonds) 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. Axis Gilt Fund (An open ended debt scheme investing in government securities across maturity) This product is suitable for investors who are seeking* Credit risk free returns over medium to long term Investment mainly in Government securities across maturities Axis Dynamic Bond Fund (An open ended dynamic debt scheme investing across duration) 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. *Investors should consult their financial advisers if in doubt about whether the product is suitable for them. 16
Product Labelling Fund Name Riskometer Product Labelling Axis Hybrid Fund Series 5, 22,23,24 (42 months close ended debt scheme) This product is suitable for investors who are seeking* Capital appreciation while generating income over medium to long term. To Investment in debt and money market Instruments as well as equity and equity related Instruments Axis Gold ETF (An open ended scheme replicating/tracking Domestic Price of Gold. Continuous Offer of Units in Creation Unit Size at NAV based prices. ) 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 *Investors should consult their financial advisers if in doubt about whether the product is suitable for them. 17
Statutory Details and Risk Factors 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 Ltd. 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. This document does not constitute advice to buy/sell any scheme of Axis Mutual Fund. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Ltd. nor Axis Asset Management Company Ltd., 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. Please consult your tax adviser with respect to the specific tax implications Data as on Sep 30 th 2018 Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. 18
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