fixed income update - axismf 1y 2y 3y 4y 5y 10y 1 year back 6 months back current . 9 4.0 4.5 5.0...

1

FIXED INCOME UPDATE

2

Abstract

Rates are headed down on lower inflation

– Inflation is likely to hit the RBI’s disinflationary path

– Bond yields may further fall on continuation of rate cuts

Macro conditions have improved

–Twin-deficits under control

–Currency stable, FX reserves higher

Effect of US rate reversal unlikely to be disruptive

3

Inflation back in RBI’s comfort zone

Source of data: RBI – Monetary Policy Documents, Bloomberg, *(for Jan 15)

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

5.5% 6% 6.5% 5.5% 8.0% 6.0%

9.68% 7.69% 5.65% 6.0% Currently 5.11 %*

WPI CPI

AC

TU

AL TA

RG

ET

Might

4.0%

4

Lower inflation creating room for further rate cuts

Source of data: Bloomberg, Statement by Dr. Raghuram G Rajan, Governor on Monetary Policy on 4th Mar 2015

“…RBI will seek to bring the inflation rate to the mid-point of the band of 4 +/- 2 per cent provided for in

the agreement, i.e., to 4 per cent by the end of a two year period starting

fiscal year 2016-17 …”

– From the statement by RBI Governor on Monetary Policy, 4th March 2015

7.5%

4%

5%

6%

7%

8%

9%

10%

11%

12%

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15

CPI Inflation Repo Rate

5

Real rates have turned positive – will improve savings rate

1 year FD less CPI inflation

Source of data: Bloomberg., 1 year FD considered is SBI 1 year FD

6

Lower oil, commodities prices will help macro

Source: Bloomberg

Brent Crude Oil prices (USD) S&P GS Commodity Index (USD)

Low commodity prices helping

current account deficit to ease

40

50

60

70

80

90

100

110

120

Aug

-13

Nov-1

3

Feb-1

4

Ma

y-1

4

Aug

-14

Nov-1

4

Feb-1

5360

400

440

480

520

560

600

640

680

720

Sep-1

3

De

c-1

3

Ma

r-1

4

Jun-1

4

Sep-1

4

De

c-1

4

7

Attractive yields leading to massive foreign flows

Source of Data: Bloomberg.

FII inflows in debt (US$ mn)

(15,000)

(10,000)

(5,000)

-

5,000

10,000

15,000

20,000

25,000

30,000

CY2008

CY2009

CY2010

CY2011

CY2012

CY2013

CY2014

CY2015(YTD)

8

Yields have moved down across the curve

Source of data: Bloomberg. Current: 27th Feb 2015, 6 months back :28th Aug 2014, 1 year back: 28th Feb 2014

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

CBLO 1Y 2Y 3Y 4Y 5Y 10Y

1 year back

6 months back

Current

9

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

Repo Rate

Duration outperforms credit during rate cut cycles

Duration 31% 2% 16% -7% 16%

Credit 20% 7% 12% 6% 12%

Jul'08-

May'09 May'09-Nov'11 Nov'11-May'13

May'13-

Jan'14 Jan'14-Mar’15*

Duration: 10 yr G-Sec, Credit: 3 year AA Corp Bond, Source: Bloomberg, Axis MF Analysis, * As on 4th Mar 2015

Retu

rns

10

US rate hikes not likely to be disruptive for local markets

Source of Data: Bloomberg.

0

2

4

6

8

10

12

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

10 yr G-Sec Yield (%)

US Fed Funds Target Rate (%)

Repo Rate (%)

11

Summary

• Continuation of rate cuts can support further fall in bond yields across the

curve leading to rising bond prices, the trend can continue over the medium term

• Investors should look at investments in products that can participate in this trend

• Investors with shorter horizon (6-12 months) and/or lower risk appetite should

consider Axis Short Term Fund and Axis Fixed Income Opportunities Fund

• Investors with longer horizon (beyond 12 months) and looking for

absolute returns should look at Axis Dynamic Bond Fund and Axis Income Fund

12

Fixed Income Funds

13

We offer a tight basket of clearly positioned fixed income funds

Portfolio maturity is based on the prevailing market conditions and is subject to changes depending on the fund

manager’s view of the fixed income markets.

Re

turn

s

Duration Risk

Axis Constant

Maturity 10

Year Fund

Axis

Liquid

Fund

Axis

Income

Fund

Axis Short

Term Fund

Axis

Banking

Debt Fund

Axis

Treasury

Advantage

Fund

14

Fund positioning

Strategy followed is based on the current market conditions and is subject to changes depending on the

fund manager’s view of the markets.

Positioning Current

YTM

Portfolio

Maturity

Portfolio

Volatility

Recommended

Min Investment

Horizon

Axis Treasury

Advantage Fund Liquidity Management 8.78% 120 days Low 1 month

Axis Short Term

Fund Regular income 8.60% 3.0 yrs Medium 6 months

Axis Fixed Income

Opportunities

Fund

Regular Income 8.89% 4.1 yrs Medium 6 months

Axis Income Fund Income with potential for

MTM 8.10% 11.5 yrs High 1 Year

Axis Dynamic

Bond Fund

Income with potential for

MTM 8.04% 12.2 yrs High 1 Year

Axis Constant

Maturity 10-Year

Fund

Replicate passive 10 year

maturity 7.72% 10.4 yrs High 1 Year

15

Axis Fixed Income

Opportunities Fund

16

Narrowly defined funds get affected by the market cycle

Income Funds Lower rated

Credit Funds

Balanced strategy that dynamically allocates across segments

with a controlled risk budget

High duration

risk High Credit Risk

Higher Rated

Short Term Funds

Lower accrual rates

Axis FIOF

Advantage

Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets. High

Rated short term funds are those which invest in instruments which are rated AAA/A1+ & equivalent or G-sec. Lower rated credit funds are those

which invest in instruments which are rated below AAA/A1+ & equivalent. Axis FIOF refers to Axis Fixed Income Opportunities Fund

17

Axis Fixed Income Opportunities Fund : Positioning

*Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager’s view of the

markets.

Capturing opportunities across accrual, credit and duration

Maintaining duration within 3 years*

Portfolio Characteristics

Average Maturity 4.1 years

Modified Duration 2.9 years

Yield to Maturity^ 8.89%

Current Portfolio Mix

Accrual 40-45%

Credit 25-30%

Duration 20-25%

Aims for improved performance Controlled risk

by by

18

Portfolio Strategies - Summary

Accrual Credit Duration

Portfolio Role Core Core Tactical

Description Money market and

short term debt

Below AAA and up to

A rated issuers

Dynamic based on

market outlook

Impact Primarily Accrual,

with some MTM

Accrual, with some

MTM Absolute return

Typical Allocation

Range 40-80% 20-30% 0-30%

Current Allocation 40-45% 25-30% 20-25%

Strategy followed is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets.

19

Axis Short Term Fund

20


Average for the last 1 year

Allocation to High Rated

Papers# 84.0%

Allocation to G-Sec 11.2%


Average Maturity 3.0 Years



High quality & low-risk strategy

Capture opportunities in the

short term segment

Medium term horizon

Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets. ^The

yield to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the returns that

maybe generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The calculation is based on

the invested corpus. #High Rated Papers refers to instruments which are rated AAA/A1+ & equivalent or G-sec

21

Dynamically managed short duration fund

0

1

1

2

2

3

3

4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15

Ave

rag

e M

atu

rity

(ye

ars

)

% o

f N

et A

sse

ts

Asset Allocation Mix & Average Maturity

Average Maturity (years)

Source of data: ACEMF. Fund above is Axis Short Term Fund

Corporate Bonds

Money Market Instruments

G-Sec

22

Performance as on 31st Dec 2014

Return Period Axis Short Term Fund

– Growth (%)

Crisil Short Term

Bond Fund Index*

(%)

Crisil 1 Year T-Bill

Index ** (%)

Dec’11 – Dec’12 10.08 9.15 8.11

Dec’12 – Dec’13 7.30 8.27 5.86

Dec’13 – Dec’14 10.04 10.47 8.56

Since Inception 8.21 8.08 6.37

Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. Since inception returns are

calculated on Rs. 10 invested at inception. Date of Inception: 22nd January 2010. Direct plan returns are from 1st January 2013. Devang

Shah is the fund manager. Devang Shah managed 18 schemes. Please refer to annexure for performance of all schemes managed by the

fund managers. Current value of Investment if Rs. 10,000 was invested on inception date – Rs. 14,772, Crisil Short Term Bond Fund Index:

14,679 & Crisil 1 Year T-Bill Index: Rs. 13,570; Direct Plan: 12,000, Crisil Short Term Bond Fund Index: 11,955 Crisil 1 Year T-Bill Index:

11,487, * Benchmark, ** Additional Benchmark

23

Axis Dynamic Bond Fund

24


Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets. ^The yield

to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the returns that maybe

generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested

corpus. #High Rated Papers refers to instruments which are rated AAA/A1+ & equivalent or G-sec

Invests in best ideas Dynamically

allocates across all segments

Active duration management






Allocation to High

Rated Papers# 94.0%

Allocation to G-

Sec 55.2%

25

Dynamically managed maturity profile

0

2

4

6

8

10

12

14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14

Ave

rage

Mat

uri

ty (

year

s)

% o

f N

et A

sset

s


Average Maturity (years)

Corporate Bonds

G-Sec


Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets.

Source of data: ACEMF. Fund above is Axis Dynamic Bond Fund

26


Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. Since inception returns are calculated on Rs. 10

invested at inception. Date of Inception: 27th April 2011. Direct Plan return is calculated from 1st January 2013. R. Sivakumar & Devang Shah are the fund

managers. R. Sivakumar manages 2 schemes & Devang Shah manages 18 schemes. Please refer to annexure for performance of all schemes managed

by the fund managers. Current value of Investment if Rs. 10,000 was invested on inception date – Rs. 13,908, Crisil Composite Bond Fund Index: 13,637;

Direct plan: 12,251 Crisil Composite Bond Fund Index: 11,840, * Benchmark

Return Period Axis Dynamic Bond Fund – Growth % Crisil Composite Bond Fund Index

(Benchmark) %

Dec’11 – Dec’12 10.81 9.38

Dec’12 – Dec’13 4.92 3.79

Dec’13 – Dec’14 14.06 14.31

Since Inception 9.37 8.79

27

Axis Income Fund

28

Axis Income Fund

Active Management

Suitable for a falling interest rate

environment

Modified duration in the range of

2 to 7 years






Allocation to High

Rated Papers# 88.1%

Allocation to G-Sec 63.3%

Allocation & maturity is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets.

^The yield to maturity given above is based on the portfolio of funds as on date given above. This should not be taken as an indication of the

returns that maybe generated by the fund and the securities bought by the fund may or may not be held till their respective maturities. The

calculation is based on the invested corpus. #High Rated Papers refers to instruments which are rated AAA/ A1+ & equivalent or G-sec.

29

Active management of duration within a range

0

2

4

6

8

10

12

14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%A

pr-

12

Jul-

12

Oct

-12

Jan

-13

Ap

r-1

3

Jul-

13

Oct

-13

Jan

-14

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ave

rage

Mat

uri

ty (

year

s)

% o

f N

et A

sset

s


Average Maturity (years)Source of data: ACEMF. Fund above is Axis Income Fund

Corporate Bonds

G-Sec


30


Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. Since inception returns are calculated on

Rs. 10 invested at inception. Date of Inception: 27th April 2011. Direct Plan return is calculated from 1st January 2013. R. Sivakumar & Devang Shah

are the fund managers. R. Sivakumar manages 2 schemes & Devang Shah manages 18 schemes. Please refer to annexure for performance of all

schemes managed by the fund managers. Current value of Investment if Rs. 10,000 was invested on inception date – Rs. 12,987, Crisil Composite

Bond Fund Index: Rs. 12,713, Crisil 10 Year Gilt Index: Rs. 12,337; Direct plan: Rs. 12,171 Crisil Composite Bond Fund Index: Rs. 11,790, Crisil 10

Year Gilt Index: Rs. 11,210 * Benchmark

Return Period

Axis Income Fund –

Growth

%

Crisil Composite Bond

Fund Index

(Benchmark) %

Crisil 10 Year Gilt

Index (Additional

Benchmark)

Dec’12 – Dec’13 4.72 3.79 -0.68

Dec’13 – Dec’14 15.01 14.31 14.14

Since Inception 9.93 9.08 7.90

31

Fixed Income Funds -

Snapshot

32

Fixed Income Offerings - Snapshot

Features Axis

Liquid Fund

Axis Banking

Debt Fund

Axis Constant Maturity 10

Year Fund

Axis

Short Term Fund

Primary Asset Class^ Money Market

Instruments <91 days Primarily in Bank CDs G-Sec

Short Term Debt & Money

Market Instruments

Average Maturity 27 days 357 days 10.4 yrs 3.0 yrs

Modified Duration 27 days 342 days 6.8 yrs 2.2 yrs

Yield to Maturity

(%)* 8.39% 8.68% 7.72% 8.60%

Asset Mix Money Market

Instruments: 100%

Money Market

Instruments: 100% G-Sec: 100%

Corporate Bond: 53%

Money Market Instruments: 28%

G-Sec: 19%

Rating Mix Sovereign/ AAA &

equivalent$: 100%

AAA & equivalent$:

100.0%

Sovereign:

100.0%

AAA & equivalent$: 83%

AA: 7%

AA+: 7%

AA-: 3%

Exit Load Nil Nil Nil

0.25% if redeemed / switched -

out within 1 month from the date

of allotment (wef 17th Sep 2014)

Why Invest? Cash

Management

Short term fund

with high quality

portfolio

To target a specific duration Actively Managed Short Duration

Fund with Daily Liquidity$

$AAA & Equivalent includes AAA/A1+-rated papers. ^Note: Allocation & duration is based on the current market conditions and is subject

to changes depending on the fund manager’s view of the markets. *The yield to maturity given above is based on the portfolio of funds

as on date given above. This should not be taken as an indication of the returns that maybe generated by the fund and the securities

bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested corpus.

33

Fixed Income Offerings - Snapshot

Features Axis Treasury

Advantage Fund

Axis Fixed Income Opportunities

Fund

Axis

Income Fund

Axis

Dynamic Bond Fund

Primary Asset

Class^

Money Market & Short

Term Debt Instruments

Across all fixed income

instruments such that the portfolio

duration is within 3 yrs

Primarily long dated Corporate

Bonds & G-Sec

Across all fixed income

instruments

Average Maturity 120 days 4.1 yrs 11.5 yrs 12.2 yrs

Modified Duration 114 days 2.9 yrs 6.8 yrs 7.0 yrs

Yield to Maturity

(%)* 8.78% 8.89% 8.10% 8.04%

Asset Mix Money Market

Instruments: 79%

Corporate Bond: 21%

Corporate Bond: 51%


G-Sec: 22%

G-Sec: 69%

Corporate Bond: 29%


G-Sec: 67%

Corporate Bond: 28%


Rating Mix

Sovereign/ AAA &

equivalent$: 84%

AA: 8%

AA-: 6%

A+: 2%

Sovereign/ AAA & equivalent$:

70%

AA: 13%

AA-: 10%

A+: 7%


93%

AA: 2 %

AA-: 5%


94%

AA+: 2%

AA: 2%

AA-: 2%

Exit Load Nil

From the date of allotment, if

redeemed/ switched out within 1

year: 1%,

1-2 years: 0.50% (w.e.f. 17th Sep

2014)

1.00% if redeemed / switched -

out within 12 months from the

date of allotment (wef 1st Jan

2015)

1% if redeemed / switched - out

within 3 years from the date of

allotment (wef 1st Oct 2014)

Why Invest? For spare cash in your

Bank Account

To capture opportunities across

accrual, credit and duration space

Active Management within a

duration range suitable for a

falling interest rate environment

“Go Anywhere” Fund following a

Best Ideas Approach

$AAA & Equivalent includes AAA/A1+-rated papers. ^Note: Allocation & duration is based on the current market conditions and is subject

to changes depending on the fund manager’s view of the markets. *The yield to maturity given above is based on the portfolio of funds

as on date given above. This should not be taken as an indication of the returns that maybe generated by the fund and the securities

bought by the fund may or may not be held till their respective maturities. The calculation is based on the invested corpus.

34

Annexure

Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV. The above data excludes

performance of all the schemes which have not completed a year.

Annexure for returns of schemes managed by fund manager (as on 31st Dec 2014)

35

Annexure


performance of all the schemes which have not completed a year.


36

Annexure


performance of all the schemes which have not completed a year


37

Annexure

Past performance may or may not be sustained in future. Calculations are based on Growth Option NAV.

The above data excludes performance of all the schemes which have not completed a year. W.e.f January 1st,

2013, Axis Treasury Advantage Fund – Institutional Plan has been renamed Axis Treasury Advantage Fund.


38

Axis Treasury Advantage Fund

This product is suitable for investors who are seeking *

• Regular income over short term

• Investment in debt and money market instruments

• Low risk (BLUE)

Axis Banking Debt Fund


• Regular income over short to medium term


issued by banks

• Low risk (BLUE)

Axis Constant Maturity 10 Year Fund


• Credit risk free returns over medium to long term

• Investment mainly in Government securities to generate

returns similar to that of 10 year government bonds

• Low risk (BLUE)



• Regular income while maintaining liquidity over short to

medium term


• Low risk (BLUE)



• Optimal returns over medium to long term

• To generate stable returns while maintaining liquidity

through active management of a portfolio of debt and

money market instruments

• Low risk (BLUE)

Axis Income Fund


• Optimal returns over medium to long term

• Investment in a diversified portfolio of high quality debt and

money market securities to generate optimal risk adjusted

returns while maintaining liquidity

• Low risk (BLUE)

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them

Note: Risk is represented as:

(BLUE) investors understand that their principal will be at low risk

(YELLOW) investors understand that their principal will be at medium risk

(BROWN) investors understand that their principal will be at high risk

Axis Liquid Fund


• Regular income over short term


• Low risk (BLUE)

Axis Fixed Income Opportunities Fund


• Stable returns in the short to medium term


across the yield curve and credit spectrum

• Low risk (BLUE)

39

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them

Note: Risk is represented as:

(BLUE) investors understand that their principal will be at low risk

(YELLOW) investors understand that their principal will be at medium risk

(BROWN) investors understand that their principal will be at high risk

Axis Income Saver


• Capital appreciation while generating income over

medium to long term

• Investment in debt and money market instruments as

well as equity and equity related instruments while

managing risk through active asset allocation

• Medium risk (YELLOW)

Axis Triple Advantage Fund


• Capital appreciation & generating income over long

term

• Investment in a diversified portfolio of equity and equity

related instruments, fixed income instruments & gold

Exchange Traded Funds


Axis Gold ETF


• Capital appreciation over medium to long term

• Investment predominantly in gold in order to generate

returns similar to the performance of gold, subject to

tracking error


Axis Gold Fund


• Capital appreciation over medium to long term

• Investment predominantly in Axis Gold ETF in order to

generate returns similar to the underlying fund, subject

to tracking error


Axis Capital Protection Oriented Fund – Series 1 to 5


• Capital appreciation with low risk of capital loss over

medium to long term.


well as equity and equity related instruments


Axis Hybrid Fund – Series 1 to 7


• Capital appreciation while generating income over

medium to long term


well as equity and equity related instruments


40

Disclaimer: Past performance may or may not be sustained in the future. Sector(s) / Stock(s) / Issuer(s) mentioned above are

for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund

manager(s) may or may not choose to hold the stock mentioned, from time to time. Investors are requested to consult their

financial, tax and other advisors before taking any investment decision(s).

Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank

Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co.

Ltd. (the AMC) Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of

the scheme.

This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment

decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors

or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information

contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and

opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required

from time to time.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

Source of Data: Bloomberg, RBI, ACEMF

Data as on 27th Feb 2015

Statutory Details and Risk Factors