Axis Midcap - Good show since launch: HOLD :: Business Line

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With about 40 per cent returns, the Axis Midcap fund is among the top five performers (diversified category) in the 2012 rally. Though the fund was launched only in February 2011, it has put up a good show since then. Hence, existing investors can continue to hold on to their units.

Benchmarked to the BSE Midcap index, the fund has a mandate to achieve long-term capital appreciation by investing predominantly in equity and equity-related instruments of mid-sized companies. The focus of the fund is to invest in relatively larger companies within this category.

Performance

Given that it is less than two years since its launch, the fund has only a limited track record. Nevertheless, it has put up a decent one-year performance, beating its benchmark and category returns. The fund has delivered a one-year return of 32.8 per cent as against the 17 per cent return of its benchmark and the category average of 23.7 per cent.

Only two other mid-cap funds — SBI Magnum Emerging Businesses and Principal Emerging Bluechip — sport marginally better returns in the last one year. Since inception, the fund has given 13.35 per cent returns.

Not only has the fund participated well in the 2012 rally but it has also contained downside in the 2011 fall.

Between March and December 2011, when the BSE Midcap index fell by 21.9 per cent, Axis Midcap restricted the fall in its NAV to 11.5 per cent. But this was due to its high cash holdings in this period. Launched in February 2011, the fund benefited from the fact that it was not fully deployed in equities then.

Given that the fund does not have an established performance record in rallies and falls, fresh investments need not be considered at this point in time.

Portfolio

While the fund started out favouring banks and software, stocks in the gas, auto ancillary and consumer non-durables space soon took over.

Like many other diversified funds, Axis Midcap took refuge in the defensive consumer non-durables space to beat market volatility.

From 4.3 per cent in March 2011, holdings in the sector moved to 13.3 per cent by August 2012. Considering the rich valuations, consumer non-durable holdings have been trimmed in the last two months.

The same holds true of its defensive bets in auto ancillaries such as Apollo Tyres and Amara Raja Batteries. The fund slowly increased holdings to up to 4.2 per cent in each of these stocks till September 2012. Exposures have been brought down in October.

Banks and software have regained the top positions in the last two months.

The fund currently holds 45 stocks. The top 5 stocks account for 24.4 per cent of total holdings, IndusInd Bank, GlaxoSmithkline Consumer and Divis Labs are some of the large-caps (market cap of above Rs 7,500 crore) in its portfolio.

The NAV per unit of the growth option is Rs 12.52.