Mid-cap and small-cap stocks plunged significantly in the past one and a half year and investors are looking at large caps for some solace, investing directly in large cap stocks or via large cap mutual funds. Large-cap funds are ideal for people looking for long-term capital appreciation by investing in equities but with an element of stability.

Axis Bluechip Fund (erstwhile Axis Equity Fund) is one such large-cap fund that has been in the limelight for its superior performance over the last few years. The fund has done well under its current fund manager Mr Shreyash Devalkar who has been managing the scheme since 23^rd November 2016.

Categorised under large cap fund, Axis Bluechip Fund is mandated to hold over 80% allocation to large caps, while the remaining can be in mid and small-caps. However, the fund maintains almost zero exposure to mid and small-caps. It aims to outperform the benchmark Nifty 50-TRI while undertaking a lower risk than the benchmark.

In this brief analysis, we take a close look at the features and performance of Axis Bluechip Fund.

Investment objective of Axis Bluechip Fund

The investment objective of the scheme is to achieve long-term capital appreciation by investing in a diversified portfolio predominantly consisting of equity and equity related instruments of large cap companies including derivatives.

Fund Facts Axis Bluechip Fund

Category	Large cap Fund	Style	Growth
Type	Open ended	Market Cap Bias	Large cap
Launch Date	05-Jan-2010	SI Return (CAGR)	11.68%
Corpus (Cr)	Rs 6,303	Min./Add. Inv.	Rs 5,000 / Rs 100
Expense Ratio (Dir/Reg)	0.85% / 2.08%	Exit Load	1%

Portfolio Data as on June 30, 2019.
SI Return as on July 23, 2019.
(Source: ACE MF)

Growth Of Rs 10,000, If Invested In Axis Bluechip Fund 5 Years Ago

Data as on July 23, 2019
(Source: ACE MF)

Every Rs 10,000 invested in Axis Bluechip Fund five years back on July 23, 2014, would have grown to Rs 17,807 as on July 23, 2019. This translates in to a compounded annualised growth rate of 12.23%. In comparison, a simultaneous investment of Rs 10,000 in its benchmark – NIFTY 50 – TRI index would now be worth Rs 15,470 (a CAGR of 9.12%). As can be seen in the chart above, the large-cap fund has been able to generate decent alpha over its benchmark in the last 5 years.

Axis Bluechip Fund: Year-on-Year Performance

YTD as on July 23, 2019
(Source: ACE MF)

Launched in January 2010, Axis Bluechip Fund has a track record of over 9 years. The year-on-year performance comparison of the fund vis-à-vis its benchmark – NIFTY 50 – TRI shows that the fund has outperformed the benchmark in 8 out of last 9 calendar years. The fund underperformed the benchmark only in CY 2016 when its performance lagged the index by 8 percentage points. The fund has been able to manage its downside well which can be seen in its performance of CY 2011 and 2015. Bulk of the alpha was generated in CY 2013, 2014 and 2017. In the current year as well the fund has shown decent outperformance over its benchmark.

Axis Bluechip Fund: Performance vis-à-vis category peers

Scheme name	Corpus (Cr.)	1-year (%)	2-year (%)	3-year (%)	5-year (%)	Std Dev	Sharpe
Mirae Asset Large Cap Fund	13,618	6.82	14.33	16.50	19.84	12.20	0.19
Axis Bluechip Fund	6,303	11.64	17.86	15.30	16.12	12.29	0.20
Reliance Large Cap Fund	13,076	7.25	14.17	15.15	18.37	13.41	0.16
HDFC Top 100 Fund	17,912	7.56	12.19	15.04	15.57	13.23	0.17
ICICI Pru Bluechip Fund	22,117	5.35	12.51	14.42	15.86	11.26	0.14
Indiabulls Blue Chip Fund	238	5.10	12.30	14.17	14.77	12.88	0.15
Canara Rob Bluechip Equity Fund	211	8.01	13.13	13.80	14.49	12.23	0.15
HSBC Large Cap Equity Fund	687	2.93	10.47	13.22	13.43	12.60	0.12
IDFC Large Cap Fund	435	3.33	11.46	13.21	12.33	12.11	0.11
Edelweiss Large Cap Fund	166	6.80	13.11	13.07	15.11	12.86	0.12
Invesco India Largecap Fund	196	5.61	11.97	12.93	16.23	11.78	0.12
Aditya Birla SL Frontline Equity Fund	21,664	2.46	9.62	12.47	15.81	12.10	0.09
Essel Large Cap Equity Fund	112	1.44	9.19	12.17	14.08	12.97	0.09
UTI Mastershare	6,061	5.56	11.20	11.82	14.55	11.59	0.09
Tata Large Cap Fund	823	4.17	10.26	11.79	14.01	12.36	0.12
Kotak Bluechip Fund	1,377	4.28	10.19	11.64	15.39	12.32	0.08
SBI BlueChip Fund	22,679	1.77	9.17	11.63	17.04	12.38	0.08
DHFL Pramerica Large Cap Fund	339	3.88	10.26	11.58	15.00	11.63	0.11
L&T India Large Cap Fund	496	3.68	9.72	10.81	14.02	12.34	0.09
DSP Top 100 Equity Fund	2,803	1.44	7.68	10.71	12.48	13.82	0.06
NIFTY 50 – TRI		9.12	13.83	13.83	13.20	11.61	0.15

Returns are on a rolling basis and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
(Data as on July 23, 2019)
(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.

Axis Bluechip Fund has a strong performance track record and has outperformed its benchmark and category average across 1-year, 2-year, 3-year and 5-year rolling periods. It stood among top 3 large cap funds on a 3-year rolling period, while other two being Mirae Asset Large Cap Fund and Reliance Large Cap Fund.             

On risk-return parameters, the fund has shown reasonable volatility and is in line with most of the category peers. However, its risk-adjusted returns are among the best in the category.

Investment Strategy of Axis Bluechip Fund

The fund predominantly invests in equity and equity related instruments of large cap companies with strong growth and sustainable business models, whilst managing risk.

The fund holds a compact portfolio of 25 stocks, with emphasis on quality and growth. Its portfolio is built utilising the bottom-up approach, focusing on appreciation potential of individual stocks from a fundamental perspective. It employs a `Fair value based’ research process to analyse the growth potential of stocks. The stocks are carefully selected to include companies having robust business models and enjoying sustainable competitive advantage as compared to their competitors.

Axis Bluechip Fund’s portfolio is managed actively to provide investors a portfolio of strong growth companies. The fund aims to utilise a holistic risk management strategy to manage risk associated with investing in equity markets.

Axis Bluechip Fund Portfolio Allocation And Market Capitalisation Trend

Holdings (in %) as on June 30, 2019
(Source: ACE MF)

Axis Bluechip Fund invests 80-90% of its holding in large-cap stocks. Though the scheme has the flexibility to invest up to 20% in small and mid-caps it avoids taking any exposure to lower market caps. The cash & debt holding of the fund is in the range of 10-20%. The fund has kept itself away from the mid and small cap segment in the current calendar year, which could be due to higher volatility witnessed in this space over the past one and a half year.

Axis Bluechip Fund Top Portfolio Holdings

Holdings (in %) as on June 30, 2019
(Source: ACE MF)

As of June 30, 2019, Axis Bluechip Fund held a compact portfolio of 23 stocks, of which 22 stocks belong to large-cap category. The top 10 stocks constitute 61 of the total holdings and are mainly focused towards Banking and Finance sector. HDFC Bank tops the list with an allocation of 9.5%, followed by Bajaj Finance and Kotak Mahindra Bank with an allocation of around 9% each. This is closely followed by TCS (7.7%) and ICICI Bank (5.8%). The other stocks in the top 10 holdings have an allocation in the range of 3.5%-4.7%.

The fund has a total exposure of 41.8% of its assets towards Banking and Finance sector. Banking sector leads the sectorial allocation with an allocation of 24.3% while Finance sector comes next with an exposure of 17.6%. Infotech and Consumption follow with an allocation of 11.5% and 8%, respectively.

Top Contributors

Among the stocks in the fund’s portfolio, Bajaj Finance contributed the most to its gains in the last 1 year with a portfolio return of around 2.2%. The other top stocks which contributed to the portfolio gains were HDFC Bank, Tata Consultancy Services, Kotak Mahindra Bank and HDFC Ltd.

The stock that eroded the portfolio gains the most was Maruti Suzuki, pulling down the fund’s return by around 1.7%, along with few others like Bandhan Bank, Avenue Supermarts and Asian Paints.

Suitability of Axis Bluechip Fund

Large-cap companies are better poised to handle market volatility as compared to mid and small caps and can appreciate wealth over long-term. This makes Axis Bluechip Fund suitable for investors with moderately high risk appetite looking for capital appreciation over a period of 5 years or more.

The fund has performed consistently well in short-term and long-term period and across market cycles. It outperformed the benchmark and category peers with considerable margin across rolling time periods of 1 year to 5 years.

While the fund’s portfolio size and high concentration towards few sectors in top holdings may increase the risk, the stability of large caps along with active management of portfolio would enable risk-mitigation. The fund’s focus on selecting companies with strong growth potential and sustainable business model would further improve its risk-return potential.

Before you pick a large-cap fund for investment, do weigh all options and make a prudent choice. You need to track its performance by comparing it with the benchmark and category peers across time periods and various market cycles. Furthermore, the scheme should match your risk profile and should be suitable to meet your investment goals.

This article first appeared on PersonalFN here.