Equity linked saving schemes (ELSS) are diversified equity funds that come with the dual advantage of wealth-building potential and tax-saving. These funds come with a lock-in period of three years which is the lowest as compared to other tax saving instruments. The lock-in period allows the fund manager to take more informed decision as they can concentrate on picking long term bets.
Axis Long Term Equity Fund is one such ELSS that aims to generate income and capital appreciation from a diversified portfolio of predominantly equity and equity-related instruments.
Launched in December 2009, the fund has a corpus of Rs 20,425 crore which makes it the largest scheme in the category.
The fund is managed by Mr Jinesh Gopani (since April 2011) who has over 18 years of experience in the financial markets.
Graph 1: Growth of Rs 10,000 if invested in Axis Long Term Equity Fund 5 years ago
If you had invested Rs 10,000 in Axis Long Term Equity Fund five years back on October 16, 2014, it would now be worth Rs 20,022 (as on October 16, 2019). This translates into a compounded annualised growth rate of 14.89%. In comparison, a simultaneous investment of Rs 10,000 in its benchmark S&P BSE 200 - TRI would have grown to Rs 16,132 (a CAGR of 10.04%). As can be seen in the chart alongside, the fund has generated remarkable lead over the benchmark in the last five years.
Graph 2: Axis Long Term Equity Fund year-on-year performance
Launched in December 2009, Axis Long Term Equity Fund has a track record of almost a decade. The year-on-year performance comparison of the fund vis-a-vis its benchmark S&P BSE 200 - TRI shows that the fund outperformed the index in all the last nine calendar years (barring CY 2016). The outperformance in most of the years has been with a noticeable margin. In the current year too, the fund has continued with its streak of outpacing the benchmark.
Table 1: Axis Long Term Equity Fund performance vis-à-vis category peers
Returns are on a rolling basis and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on October 16, 2019
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.
Axis Long Term Equity Fund performed exceedingly well and outpaced the benchmark and average category peers across rolling periods.
The fund stands among the top performers across rolling periods and is also a category topper on a five year rolling period basis. The other top performers within the category include Mirae Asset Tax Saver Fund, Motilal Oswal Long Term Equity Fund, JM Tax Gain Fund and Taurus Tax Shield Fund.
In terms of risk-return parameters, the fund registered lower volatility as compared to average category peers but higher volatility as compared to the benchmark. However, it has rewarded investors with superior risk-adjusted returns.
Investment strategy of Axis Long Term Equity Fund
Categorised as ELSS, Axis Long Term Equity Fund is mandated to hold minimum 80% of its assets in equity & equity related instruments. The fund has the flexibility to invest across market capitalisation.
It seeks to select stocks of strong growth companies having sustainable business models and competitive advantage. The fund utilises bottom-up stock selection process and employs a fundamentals based research process to analyse the appreciation potential of each stock in its universe.
The scheme endeavours to remain fully invested in equity and equity related instruments at all times.
Graph 3: Axis Long Term Equity Fund portfolio allocation and market capitalisation trend
Axis Long Term Equity Fund invests across market capitalisation and aims to remain fully invested in equities. The fund has a large cap bias where it holds around 65% of its assets while it also has a significant exposure in mid caps. It allocates 20-30% of its assets in mid caps, whereas, it allocates up to 8% in small caps. Rest of the holdings is maintained in the form of cash along with a marginal allocation to debt instruments.
Graph 4: Axis Long Term Equity Fund top portfolio holdings
Holding (in %) as on September 30, 2019
(Source: ACE MF)
Axis Long Term Equity Fund held a compact portfolio of 33 stocks as on September 30, 2019. The top 10 stocks constitute a major 65.2% of the total holdings and are mainly concentrated towards banking and finance. Bajaj Finance has the highest allocation of 9.5%, closely followed by Kotak Mahindra Bank at 8.8%, HDFC Bank at 7.7% and Pidilite Industries at 7.5%. Rest of the stocks in the top 10 holding have allocation in the range of 4-7%.
In terms of sector wise holdings, the fund has the highest exposure to Finance at 23.3% and Banks at 19.1%. This is followed by Infotech (12.9%), Chemicals (7.5%) and Retail (6.7%). Consumption, Engineering, Power, Auto ancillaries and Media & entertainment are the other prominent sectors in the portfolio.
Top contributors
Among the stocks in the portfolio, Bajaj Fiannce contributed the most to the fund's return in the last one year with a weighted return of 4.3%. Kotak Mahindra Bank, Pidilite Industries, HDFC Bank, Avenue Supermarts and Info Edge (India) were the other top contributors to the portfolio gains. These stocks are the part of the fund's top 10 holdings.
On the other hand stocks like Motherson Sumi Systems, Eicher Motors, Gruh Finance, Bandhan Bank and Tata Consultancy Services eroded some of its gains in the last one year.
Suitability of Axis Long Term Equity Fund
Axis Long Term Equity Fund allocates majority of its portfolio in selected stocks diversified across market capitalisation and sectors. Its compact portfolio style allows the fund manager to take high conviction bets on stocks having potential to generate higher returns. However, the concentrated portfolio may lead to high volatility, if any of the selected stocks come under pressure. As ELSS come with a lock-in period, investors do not have an exit option in case the scheme underperforms during that period. Such funds are suitable only for aggressive investors having moderately high risk appetite, along with an investment horizon of 5 years or more.
Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
Editor's note: The last few years have not been among the best for equity mutual funds. While most funds have underperformed or are struggling to match the returns of the benchmark, there are few funds that have the potential to constantly generate alpha for its investors. And we have recently identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2019'. Do not miss our latest research finding. Get your access to this exclusive report, right here!
DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014
About the Company including business activity
Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.
QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.
'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.
Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.
Disciplinary history
There are no outstanding litigations against the Company, its subsidiaries and its Directors.
Terms and condition on which its offer research report
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Details of associates
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Money Simplified Services Private Limited;
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PersonalFN Insurance Services India Private Limited;
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Equitymaster Agora Research Private Limited;
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Common Sense Living Private Limited;
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Quantum Advisors Private Limited;
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Quantum Asset Management Company Private Limited;
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HelpYourNGO.com India Private Limited;
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HelpYourNGO Foundation;
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Natural Streets for Performing Arts Foundation;
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Primary Real Estate Advisors Private Limited;
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HYNGO India Private Limited;
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Rahul Goel;
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I V Subramaniam.
Disclosure with regard to ownership and material conflicts of interest
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‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;
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Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company; except for one of the research analysts holding units of Axis Long Term Equity Fund.
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Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;
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Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.
Disclosure with regard to receipt of Compensation
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Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;
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Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;
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Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;
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Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
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Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report
General disclosure
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The Research Analyst has not served as an officer, director or employee of the subject Company.
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QIS or the Research Analyst has not been engaged in market making activity for the subject Company.
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Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021.
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