Axis Midcap Fund: Focusing on Emerging Sectors/Businesses

Nov 19, 2020

Visibility of green shoots of economic recovery has enthused investors about the growth prospects of the mid cap segment. The government's Make in India push, boost to MSME loans, among other measures could play a crucial role in driving corporate earnings of companies in this segment.

Recently, rating agency Moody's upgraded India's GDP estimate for CY 20 and CY 21 on the back of fiscal stimulus package announced by the government, which were aimed at manufacturing, infrastructure, job creation, credit supply, and stressed sectors of the economy. Mid cap stocks tend to do well when the economy is recovering and thus, the segment could turn out to be the outperformer in the medium to long term.

However given the volatile nature of mid cap stocks, it is important to invest sensibly through a well-managed and diversified equity mutual fund.

Axis Midcap Fund (AMF) is an actively managed mid cap fund that invests in a diversified portfolio of stocks and sectors to manage the risk.

Graph 1: Growth of Rs 10,000 if invested in Axis Midcap Fund 5 years ago

AMF is a growth oriented mid-cap biased fund that follows the bottom-up approach to stock picking. This offering from a process-driven fund house focuses on investing in high quality stocks in the mid and higher mid cap segment having potential to grow cash flows over the medium to long term. Unlike its peers that hold 60-70 stocks in the portfolio, AMF typically holds a compact portfolio of around 35-50 stocks, staying invested in known quality names where there is earnings visibility. Notably, AMF’s performance slipped in CY 2016, where it significantly underperformed the benchmark and many of its category peers. Nevertheless, the fund has recovered well despite huge correction in the mid cap space, thus making up for its underperformance. Over the past 5 years, AMF has rewarded investors with a CAGR of around 14.7%, as against 9.9% CAGR delivered by its benchmark S&P BSE Midcap – TRI index.

Graph 1
Data as on November 18, 2020
(Source: ACE MF)

Table: Axis Midcap Fund's performance vis-à-vis category peers

Scheme Name Corpus (Cr.) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) 7 Year (%) Std Dev Sharpe
Axis Midcap Fund 6,949 18.70 18.52 13.69 14.92 21.52 18.59 0.116
Invesco India Midcap Fund 1,009 18.47 12.49 8.02 13.32 21.00 22.01 0.049
DSP Midcap Fund 8,407 19.28 15.29 7.26 14.15 21.00 21.49 0.030
Tata Mid Cap Growth Fund 875 17.19 14.46 6.53 11.19 20.03 23.51 0.028
Taurus Discovery (Midcap) Fund 53 18.11 11.24 5.81 11.88 18.41 21.43 0.011
Kotak Emerging Equity Fund 7,668 16.27 13.30 5.70 13.31 22.55 23.64 0.023
Edelweiss Mid Cap Fund 926 19.14 13.50 5.68 11.98 20.93 24.11 0.021
Nippon India Growth Fund 7,005 14.75 11.21 4.38 11.13 16.30 23.62 0.006
Franklin India Prima Fund 6,337 10.57 8.99 4.06 10.94 19.07 22.33 -0.007
HDFC Mid-Cap Opportunities Fund 21,817 13.82 8.53 2.57 11.17 19.06 23.86 -0.016
S&P BSE Mid-Cap - TRI 11.49 5.52 0.39 10.18 16.16 25.03 -0.036
Returns are point to point and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on November 18, 2020
(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.

AMF has shown a noticeable turnaround in performance over the last couple of years. In the last one year, the fund has managed to generate an absolute return of around 18.7% as against 11.5% return registered by its benchmark S&P BSE Mid-Cap - TRI Index. During the corrective phase, when most of its peers were found to be struggling, AMF managed to restrict the downside. On a longer time periods of 3-year, 5-year and 7-year, the fund has managed to keep a clear lead over its benchmark and the category average.

On risk return parameters, AMF has encountered much lower volatility when compared to its category peers and the benchmark. The fund's superior outperformance over the last couple of years has helped it recover in terms of risk adjusted returns as well. Its Sharpe ratio is currently thehighest in the category.

Investment strategy of Axis Midcap Fund

AMF is mandated to invest a minimum 65% of its assets in mid-cap stocks. It aims to select larger midcap companies, which are flexible, innovative, and have high growth potential along with the proven management and liquidity. Axis as a fund house is biased towards playing long-term growth stories and holds stocks with a long term view.

Following a combination of top down and bottom up approach of stock picking, AMF invests in a fairly diversified portfolio of about 35-50 stocks, limiting exposure to single stocks within the 5% mark. Through bottom up stock picking, the fund focuses on company fundamentals and ignores the broad macro-economic trends. Although AMF follows a buy-and-hold investment strategy, it is nimble in its approach and does not hesitate to churn a small portion of its portfolio to capture attractive opportunities in the mid cap segment.

Graph 2: Top portfolio holdings in Axis Midcap Fund

Graph 2 Graph 2
Holding in (%) as on October 31, 2020
(Source: ACE MF)

As on October 31, 2020, AMF held a fairly diversified portfolio of 50 stocks. The top-10 stocks accounted for around 35.8% of its assets. Ipca Laboratories topped the list with an exposure of around 5.5%, followed by PI Industries, Cholamandalam Investment & Finance Company, Voltas, Mphasis, Avenue Supermarts, Tata Consumer Products, and Trent having an allocation in the range of 3% to 5% each.

The fund manager's conviction on stocks like Ipca Laboratories, Info Edge (India), PI Industries, Mphasis, Divi's Laboratories, Avenue Supermarts, among others has benefitted the fund in the last one year. On the other hand, companies like City Union Bank, Bata India, Bajaj Finance, The Indian Hotels Company, etc. turned out to be major laggards in the portfolio.

In terms of sector holdings, AMF's portfolio is majorly exposed to Pharma stocks with an allocation of about 14.2%, followed by Infotech at 9%. The fund's other core sectors include Banking & Finance, Engineering, Retail, Consumer Durables, Retail, Fertilisers, Consumption, Cement, and Auto Ancillaries. These sectors collectively account for around 85% of its assets.


Even though AMF has a penchant for churning its portfolio, it has shown a lot of patience with many of its stocks and sectorial bets which have paid off its investors in due course. Such approach may work in favour of the fund in the long run. As AMF avoids benchmarking the index, the investments in stocks are made typically at the conviction of the fund manager, irrespective of their weightage in the index. Thus, the performance of the fund may deviate significantly from the benchmark.

The current fund manager - Mr Shreyash Devalkar has done well to turn around the fortune of the fund and regain its top position in the mid-cap space. However, the fund's aggressive mandate makes it prone to high volatility. AMF is suitable for investors with high-risk appetite and investment horizon of at least 5 years.


Warm Regards,
Divya Grover
Research Analyst


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 identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2020'. Do not miss our latest research finding. Get your access to this exclusive report, right here!

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.


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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 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.

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Details of associates

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

  12. Suresh Lulla;

  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
  1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

  2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company; except for some of the Research Analysts holding units of Axis Midcap Fund;

  3. 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;

  4. 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
  1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

  2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

  3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

  4. 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.

  5. 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
  1. The Research Analyst has not served as an officer, director or employee of the subject Company.

  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

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Subject Company means Mutual Fund Schemes

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Website: Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

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