A 10 Year Close-ended ELSS with objective to generate capital appreciation by investing predominantly in equity and equity-related securities of midcap companies.

Summary

Investment Objective*

The scheme seeks to generate capital appreciation over a period of ten years by investing predominantly in equity and equity-related securities of midcap companies along with income tax benefit.

However, there is no assurance that the investment objective of the Scheme will be realized and the Scheme does not assure or guarantee any returns.

*Source: Scheme Information Document

Is this fund for you?

BOI AXA Midcap Tax Fund (BAMTF) is a close-ended Equity Linked Savings Fund with mid-cap bias. The scheme’s investment objective is to generate capital appreciation over a period of ten years by investing predominantly in equity and equity-related securities of midcap companies along with income tax benefit.

With the soaring prices, valuations too, have spiralled to alarming levels. The Price-to-Earnings of the mid-cap has breached the 40x mark. Many are expecting an earnings recovery to substantiate the current high valuations. As per the latest corporate results, at a broad level, earnings are not showing strong signs of a turnaround. This increases the probability of a market correction. But on the other end, strong inflows are buoying the market.

Investing in mid-cap funds at high market valuations may not seem to be an optimal investment strategy. But, there is a sound reason and a method to investing in mid-cap funds, given the current market environment. Mid-cap funds have the potential of generating supernormal returns. On the flipside, they can lead to deep losses when the market takes a turn. But, a market correction is never the end. As seen in the past, the stock market always finds a way to bounce back up. Hence, it is always best to stagger your investments and invest regularly via Systematic Investment Plans (SIPs) in good mid-cap schemes for the long-term of 5-7 years or more. No one can predict how the market will behave. It may even remain directionless for years. If you sit on the side-lines waiting for a market correction to time your investment, you may be left behind and will lose out on the wealth-creation potential of mid-cap funds.

Hence, the BAMTF is suitable for investors with a high-risk appetite and long-term investment horizon of at least 3 years. It is best suited for investors who can assume high risk in an anticipation of high returns in future.

The asset allocation under normal circumstances will be as under:

Note: Mid-caps are defined as 101st to 250th company in terms of full market capitalisation. The AMC will adopt the list of stocks prepared by AMFI in this regard.

Further it is stated in the offer document that:

• The scheme shall not invest in Derivatives.
• The Scheme shall not invest in Securitized Debt.
• The Scheme shall not invest in ADR/GDR/Foreign securities.
• The Scheme shall not engage in stock lending.
• The Scheme shall not engage in Short selling.
• The Scheme shall not invest in repo in corporate debt.

(*Source: Scheme Information Document)

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What investment strategies will the fund follow?

Under normal conditions BOI AXA Midcap Tax Fund – Series 1 would invest 65% - 100% of its net assets into equity and equity related instruments of mid cap companies. The fund manager would select companies with sustainable business model which have a potential to grow. Mid-caps are defined as 101st to 250th company in terms of market capitalisation. AMC will adopt the list prepared by AMFI.

BAMTF will follow an active fund management approach. Thereby giving fund the flexibility to pursue opportunities available in the midcap space at any given point of time. Further, it will not have any sectoral bias. Additionally, scheme aims to ensure diversification by investing into stocks across sectors in the economy.

The fund manager will follow top down approach in shortlisting stocks. Top down approach begins with global and Indian economy, the domestic policy environment and stock valuation. This in turn will help in identifying the themes which have a potential to outperform. And to finalise stock selection fund manager will follow bottom-up process. With bottom-up process stocks in the shortlisted themes would be selected based on valuations.

Further, for asset allocation purpose the Fund manager would take help of qualitative framework of MVPS (Macro, Valuation, Policy and Sentiment). Sentiment would be gauged from factors like the positive/negative breadth of the market, inflows/outflows into equity mutual funds and FII buying/selling figures.

(*Source: Scheme Information Document)

This 5 Step Process is highlighted below:

Additionally, the investment decisions for the Scheme will be taken by the Fund Manager, which will be consistent with the regulatory requirements and the investment objectives of the Schemes. The Fund may additionally observe such internal guidelines as may be prescribed by the Boards of the AMC / Trustee or any internal committee. Subject to above, the day to day investment management decision will solely be of the Fund Manager of the Scheme.

All investment decisions shall be recorded. Every investment proposed to be made for the first time in any scrip, will be preceded by making a detailed report justifying such investment.

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Fund Manager Profile

The fund will be jointly managed by Mr. Alok Singh.
 

Mr Alok Singh is Chief Investment Officer (CIO) at BOI AXA Mutual Fund. He has rich experience of over 17 years in Fixed Income Fund Management for domestic as well as overseas investors. He is a Post Graduate in Business Administration from ICFAI Business School and a CFA. Prior to joining BOI AXA AMC he was associated with BNP Paribas Asset Management Pvt. Ltd. (Feb 2005 to March 2012) and Axis Bank Limited (August 2000 to January 2005).

Other schemes managed by him are: BOI AXA Equity Fund, BOI AXA Corporate Credit Spectrum Fund, BOI AXA Manufacturing & Infrastructure Fund, BOI AXA Regular Return Fund.

He is Co-fund manager for: BOI AXA Short Term Income Fund, BOI AXA Equity Debt Rebalancer Fund (For Debt portion), BOI AXA Mid Cap Equity & Debt Fund (For Equity portion)

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Fund Outlook

On evaluating fund’s objective and investment strategy BAMTF will mostly into midcap equity and equity related instruments. Equity related instruments would include cumulative convertible preference shares and fully convertible debentures and bonds of companies, etc.

Given the global cues – The US–North Korea tension, Saudi Arabi crackdown on corrupt officers, downtrend of international oil prices, etc. its undercurrents might spill over to the Indian market as well. But a vital point to note is, the overall economic growth may not sustain without pick up in investment activity (which is hinged on internal and external factors).

Hence, long-term capital appreciation and growth would depend on how well the fund manager plays the opportunities and challenges across the market capitalization.

In an attempt to achieve its investment objective BOI AXA Midcap Tax Fund is expected to carry high risk.

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