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Axis Multicap Fund: Should You Invest? - Outside View by PersonalFN

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Axis Multicap Fund: Should You Invest?
Nov 9, 2017

NFO Summary:

Type: An open-ended equity scheme investing across large cap, mid cap, small cap stocks

Min. investment: Rs 5,000/- & in multiples of Re. 1 thereafter

Additional purchase: Rs 100 and in multiples of Re 1 thereafter

Face value: Rs 10 per unit

Benchmark Index: S&P BSE 200 Index


    - Regular Plan

    - Direct Plan

Options under each plan

    - Growth*

    - Dividend

    - Dividend Pay-out

    - Dividend Reinvestment option

*Growth is Default option

Entry load: Nil

Exit load: 1% if Units are redeemed / switched-out within 12 months from the date of allotment

Expense Ratio: Upto 3% (including additional expenses)

Issue opens: October 30, 2017

Issue closes: November 13, 2017

Investment Objective*

To generate long term capital appreciation by investing in a diversified portfolio of equity and equity related instruments across market capitalization.However, there can be no assurance that the investment objectives of the scheme will be realized.

*Source: Scheme Information Document

Is this fund for you?

The Axis Multicap Fund (AMF) is an equity oriented fund investing across large cap, mid cap, small cap stocks. The objective is to create long term capital appreciation for its investors by investing 80-100% of its net assets into equity and equity related instruments.

Multi-cap funds offer investors a diversified portfolio of stocks across the market-cap spectrum. The ability of the funds to vary their portfolio across market-caps based on the market outlook, gives investors an opportunity to earn higher returns. Some schemes may have either a predominant large-cap or mid-cap allocation. Multi-cap funds provide investors a benefit of investing across market capitalisations through a single fund.

These funds aim to give investors best of both the worlds. The investment in large cap stocks provides stability to the portfolio and that in mid and small caps help generate extra-ordinary returns. In the risk-return curve, they fit in between large-cap funds and mid- and small-cap funds.

AMF will identify companies that are at their inflection points with the potential to substantially improve their growth trajectory. Growth in these companies can happen due to market share gain from competitive advantage, industry consolidation, sunrise industry, improved management focus and capital allocation and regulatory and policy changes.

Hence, the fund is suitable for investors with a high-risk appetite and long-term investment horizon of at least 5 years. This fund is best suited for investors who can assume high risk in an anticipation of high returns in future.

How will the fund allocate its assets?

The asset allocation under normal circumstances will be as under:

Instruments Indicative allocations (% of total assets) Risk Profile High/Medium/Low
Minimum Maximum
Equity and equity related instruments#$ 80 100 High
Debt and Money market instruments* 0 20 Low to Medium
(*Source: Scheme Information Document)
$ The Scheme shall invest in equity and equity related instruments of companies across market capitalization.
# Including derivatives instruments to the extent of 50% of the Net Assets as permitted by Regulations
*Investment in Securitized debt (excluding foreign securitized debt), if undertaken, would not exceed 20% of the net assets of the Scheme.

Further it is stated in the offer document that:

  • The Scheme may seek investment opportunities in foreign securities including ADRs / GDRs / Foreign equity and debt securities. Such investment shall not exceed 50% of the net assets of the Scheme.
  • The Scheme shall not invest in foreign securitized debt and Credit default Swaps and shall not engage in short selling activities.
  • The Scheme may undertake repo transactions in corporate debt securities in accordance with the directions issued by RBI and capital market regulator from time to time.
  • The Scheme retains the flexibility to invest across all the securities in the equity, debt and Money Markets Instruments and mutual fund units. The portfolio may hold cash depending on the market condition.

Stock Lending

  • Not more than 20% of the net assets of the Scheme can generally be deployed in Stock Lending.
  • Not more than 5% of the net assets of the Scheme can generally be deployed in Stock Lending to any single counter party.

What investment strategies will the fund follow?

Being an open-ended focused equity fund, AMF aims to generate capital appreciation by investing in diversified portfolio of equity & equity related instruments across market capitalisations.The scheme will focus on undervalued companies that offer opportunities to generate superior capital returns from a medium to long term perspective.

The fund will follow bottom-up approach for stock selection process. It will pick stocks with a potential from fundaments perspective by employing "Fair Value" bases research process. Fair value is a measure of the intrinsic worth of a company. It will carefully select stocks of companies with robust business models and sustainable competitive advantages.

Further the scheme will adopt a holistic risk management strategy and has designed risk management strategies which are embedded in the investment process to manage these risks. Risk management strategy will endeavour to manage risks such as:

  • Quality Risk - Risk of investing in unsustainable / weak companies.
  • Price Risk - Risk of overpaying for a company
  • Liquidity Risk - High Impact cost of entry and exit
  • Concentration risk - Invest across the market capitalization spectrum and industries/ sectors
  • Volatility Risk - Volatility in price due to company or portfolio specific factors
  • Event Risk - Price risk due to a company / sector specific or market event

Further it will select indicative set of companies - whose growth potential is not fully priced by the market, quality companies that are going through near term challenges but with strong long-term potential and companies trading at a steep discount to their fair value.

Fund Manager Profile

The fund will be jointly managed by Mr. Jinesh Gopani and Mr Shreyansh Devalkar.

Mr Jinesh Gopani is a fund manager - Equity at Axis Asset Management Co. Ltd. He is a B. Com graduate and has done Master of Management Studies (MMS) from Bharati Vidyapeeth Institute of Management Studies and Research. He has a total work experience of about 12 years. Prior to joining Axis Asset Management Co. Ltd., Mr Gopani was associated with Birla Sun Life Asset Management Company Ltd. as a portfolio manager, Voyager India Capital Pvt. Ltd. as a Research Analyst, Emkay Shares & Stock Brokers Ltd. as a Research Analyst and Net worth Stock Broking Ltd. as a Research Analyst.

Mr Shreyansh Devalkar is Senior Fund Manager at Axis Mutual Fund. He comes with over 13 years of experience. Previously, Mr Devalkar served as a Fund Manager of Equities at BNP Paribas Asset Management, since October 2011. He was associated with BNP Paribas since January 2011. From July 2008 till January 2011, Mr. Devalkar was the Vice President of Investments at IDFC Asset Management Company Limited. He's also been associated with JP Morgan Services, Calyon Bank and Larsen and Toubro. Mr Devalkar earned an MMS in Finance from Jamnalal Bajaj Institute of Management Studies, Mumbai University and holds a Bachelor of Chemical Engineering degree from UDCT, Mumbai.

Fund Outlook

After evaluating the fund's objective and investment strategy, it is clear that AMF will have major exposure to equity and equity related instruments.

Given the global cues - The US-North Korea tension, 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).

Also, the slowdown in consumption (due to cash crunch, loss of jobs-especially in the unorganised sector, diminutive rise in salaries, slower employment growth and rural distress) when read with the investment growth number, highlights the negative output gap that exists in the Indian economy.

Growth in consumption and investment activity will be pivotal for India's economic growth. It is important for these activities to go up, while the Government expenditure is increasing at a healthy pace. Currently, it is only the Government spending that's propping up GDP growth rate and managing to offset the impact of demonetisation to an extent. As highlighted in the earlier section, private investments have grown at a dismal pace. Hence, long-term capital appreciation and growth would depend on how well the fund manager plays the opportunities and challenges across the market capitalization.

Hence, Axis Multicap Fund is expected to carry moderately high risk while achieving its investment objective.

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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