The Axis Growth Opportunities Fund has been a topic of interest among investors in the Indian mutual fund market. Launched in 2018, this fund aims to generate long-term capital appreciation by investing in a diversified portfolio of equity and equity-related instruments in both India and overseas. In this article, we will conduct a detailed analysis to determine whether the Axis Growth Opportunities Fund is a good investment option.
Performance Analysis
Historical Returns
Looking at the historical data, the fund has shown impressive returns in certain periods. For example, in the one-year period ending in May 2024, it delivered an absolute return of 40.14% and an annualized return of 40.01% for the growth option. Over a three-year period ending in May 2024, the return was 73.32% with an annualized return of 20.06%, and over five years, the return was 175.16% with an annualized return of 22.41%. These returns indicate the fund’s potential to generate significant wealth over the long term.
Comparison with Benchmark
The fund’s benchmark is the Nifty Large Midcap 250 TRI. In some periods, the fund has outperformed the benchmark, while in others, it has underperformed. For instance, in the one-year period ending in June 2024, the fund’s return was 35.85% compared to the benchmark’s 44.16%. However, over a five-year period ending in June 2024, the fund’s return of 173.69% was better than the benchmark’s 21.56%. This shows that the fund’s performance relative to the benchmark has been inconsistent.
Risk-Adjusted Returns
The Sharpe ratio, Sortino ratio, and Sterling ratio are important measures of risk-adjusted returns. The fund has a Sharpe ratio of 0.8, a Sortino ratio of 0.42, and a Sterling ratio of 0.74 . These ratios suggest that the fund has been able to generate reasonable returns relative to the risk it has taken. However, it is important to note that these ratios should be compared with those of other funds in the same category to get a better understanding of the fund’s performance.
Risk Assessment
Volatility: The standard deviation of the fund’s returns is a measure of its volatility. The Axis Growth Opportunities Fund has a standard deviation of 14.39% over the past year, which is relatively high compared to other funds in the large & mid-cap category. This indicates that the fund’s returns have been more volatile, meaning investors may experience larger fluctuations in the value of their investments.
Max Drawdown
The maximum drawdown of the fund is -16.84%, which means that at its worst point, the fund’s value declined by 16.84% from its peak. This is also relatively high compared to its peers, suggesting that investors in the fund may have faced significant losses during certain periods.
Beta: The fund has a beta of 0.92, which indicates that it is slightly more volatile than the market benchmark. A beta greater than 1 implies that the fund’s price movements are more exaggerated than those of the market, while a beta less than 1 indicates less volatility. In this case, the fund’s beta suggests that it is moderately more risky than the market as a whole.
Portfolio Composition
Sector Allocation
The fund invests in a diversified portfolio of stocks across different sectors. As of January 2023, the fund had exposure to sectors such as financial services, information technology, consumer discretionary, and healthcare, among others. This diversification helps to reduce the impact of any single sector’s performance on the fund’s overall returns.
Stock Selection
The fund managers of Axis Growth Opportunities Fund use a combination of fundamental and quantitative analysis to select stocks for the portfolio. They look for companies with strong growth potential, good management, and sound financials. The fund’s investment in both large-cap and mid-cap stocks provides investors with exposure to different segments of the market, potentially offering higher returns while also increasing the level of risk.
Overseas Exposure
One of the unique features of this fund is its overseas exposure, which allows investors to benefit from the growth opportunities in international markets. However, investing overseas also brings additional risks such as currency fluctuations, political instability, and differences in regulatory environments. The fund managers need to carefully manage these risks to ensure that the overseas investments contribute positively to the fund’s performance.
Expense Ratio
The expense ratio of the Axis Growth Opportunities Fund is 1.7% for the regular plan and 1.92% for the category average. A lower expense ratio is generally preferred as it means that a larger portion of the investor’s returns is retained. While the fund’s expense ratio is not extremely high, it is still important for investors to consider this cost when evaluating the fund’s performance. Over the long term, even a small difference in the expense ratio can have a significant impact on the final returns.
Fund Manager
The fund is managed by Jinesh Gopani and Vinayak Jayanath. Jinesh Gopani has 21 years of work experience and has been managing the fund since its inception in 2018. Vinayak Jayanath, who manages the foreign securities portion of the portfolio, has 6 years of experience and has been associated with the fund since January 2023. The experience and expertise of the fund managers play a crucial role in the fund’s performance. Their investment strategies, stock selection skills, and ability to manage risks can have a significant impact on the returns generated by the fund.
Investment Horizon and Suitability
The Axis Growth Opportunities Fund is suitable for investors with a long-term investment horizon of at least 3-4 years. This is because equity investments are generally more volatile in the short term, and it takes time for the fund’s potential to be realized. Investors who are willing to take on moderate to high levels of risk and are looking for capital appreciation may find this fund attractive. However, it is not suitable for investors who have a low tolerance for risk or who need immediate access to their funds.
Tax Implications
From a tax perspective, if the fund is sold after one year from the purchase date, long-term capital gain tax will be applicable. The current tax rate is 10% if the total long-term capital gain exceeds 1 lakh. If the fund is sold before one year, short-term capital gain tax will be applicable at a rate of 15%. Investors should be aware of these tax implications when making investment decisions.
Conclusion
In conclusion, the Axis Growth Opportunities Fund has both its strengths and weaknesses. On the positive side, it has delivered strong historical returns in some periods, has a diversified portfolio, and is managed by experienced fund managers. The fund’s overseas exposure also provides an opportunity for investors to benefit from global growth. However, the fund also has relatively high volatility, a significant max drawdown, and an expense ratio that is not the lowest in its category.
Overall, whether the Axis Growth Opportunities Fund is “good” or not depends on an individual investor’s investment goals, risk tolerance, and investment horizon. For investors with a long-term investment horizon, a higher risk tolerance, and a desire for capital appreciation, the fund may be a worthy addition to their portfolio. However, investors should carefully consider the risks involved and may also want to compare the fund with other similar funds in the market before making a decision. It is always advisable to consult a financial advisor before making any investment decisions to ensure that the investment aligns with one’s financial goals and risk profile.
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