Creating wealth by investing in Index Funds

Ashwin Patni, Head Products and Alternatives, Axis AMC helps us understand the merits of investing in index funds and leveraging passive investment strategies in an interesting conversation.
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As a country with one of the youngest populations in the world, India is beginning to see an increased interest in investing from its youth. Thanks to the awareness initiatives by regulators, fund houses, media, and financial influencers, investors have started to understand the importance of passive funds in their portfolios.

A new growth story is taking place in the midcap sector in India. Often considered as the stepping stone to the large cap segment, these midcaps have the power to generate Alpha for investors. When one is investing in the Nifty Midcap 50 Index, investors are hoping to leverage the market wisdom to achieve benchmark returns and introduce a discipline in their portfolio.

To help investors access this index, Axis Mutual Fund has launched Axis Nifty Midcap 50 Index Fund (an open ended Index Fund tracking the NIFTY Midcap 50 Index). Tracking the Nifty Midcap 50 Index, this open-ended funds are suitable for investors who are looking for a long term wealth creation solution.

To understand the funds better, we spoke to Ashwin Patni, Head Products and Alternatives, Axis AMC. Here are the key takeaways from the conversation. However, for a more nuanced and detailed understanding of the fund, you may watch the interview below.

Leveraging growth potential

Simply put, ‘cap’ or capitalisation refers to the inherent market value of a company. As such, midcaps* refer to 101st -250th company in terms of full market capitalization. As per our view, we have seen the performance of midcaps in the broader market in recent years, making them an attractive entry point for long term investors offering a favourable risk-reward quotient.

*Note: Market caps are defined as per SEBI regulations as below: a. Large Cap: 1st -100th company in terms of full market capitalization. b. Mid Cap: 101st -250th company in terms of full market capitalization. c. Small Cap: 251st company onwards in terms of full market capitalization

“The interesting thing is that only 50 stocks from the midcap universe are considered for both the funds, respectively. This essentially means that the 50 largest liquid names within the segment are what has made it to the index,” says Ashwin, talking about how the selection lessens the chance of volatility for the index.

Why choose midcap companies for long-term wealth creation?

One of the most attractive aspects of these companies is their growth potential. Companies in midcap category typically have an aggressive expansion strategy and are more receptive towards innovative ideas allowing them to scale business, especially over the long term.

Ashwin believes that while midcap companies are associated with relatively higher risk levels compared to large cap companies over the short and medium term, they have the potential to generate returns in the long term and may even emerge as alphas.

“When an economy goes through a boom cycle or a high growth period, midcaps, smallcaps are able to really generate strong returns,” he says.

Ashwin also believes that when participating in the equity markets, accessing the power of the entire market is important. “You should not limit yourself to only large caps because they are well known companies. Investing in midcap companies can expose you to different sectors, themes, new ideas, and upcoming companies, which can become tomorrow's large caps,” he says.

“It is also a chance to participate early on in the growth story of some of these companies. For instance, some IT companies or private sector banks that are in the largecap space today would have been midcaps about 10 or 15 years ago. Even before that, say about 20 years ago, they would have been in the smallcaps space. Investors who were lucky enough to participate at that time when they were in the smallcap or midcap segment, received the benefit of their full journeys,” he adds.

Leveraging the power of passive investing

Buoyed by several incentives over the long term such as market-linked returns, minimum tracking error, diversification, and transparency in portfolio composition, investors are looking at passive products with a new sense of vigor. Investors who want to opt for downside protection while still being able to leverage the benefits of the domestic markets should consider investing in passive strategies.

“There are a plethora of choices for investors today, and passive investing has the advantage of being relatively straightforward. It can work particularly well for new investors - those who want something which is simple and easy to understand and can work on a long term and consistent basis,” says Ashwin.

Talking about Axis Mutual Fund’s approach, he says, “The Axis NIFTY Midcap 50 Index Fund invests in 50 most liquid midcap stocks, giving preference for stocks where F&O contracts are traded on NSE. It presents a diversified portfolio for investors that focuses on sustainability for picking stocks. The rank of any F&O constituent in the NIFTY Midcap 150 Index based on full market capitalization is among the top NIFTY Midcap 30.”

Investing made easy

“Investors can invest in our funds with a lump sum investment or via SIP to give their mutual fund investments a disciplinary approach through systematic investment,” he adds.

“The funds have opened up for regular investments on an ongoing basis,” says Ashwin, in his closing remarks.


You can visit Axis Mutual Fund’s website www.axismf.com or download mobile app ‘Axis Mutual Fund’ (Android/IOS) and start your investment journey now.

Sources: Bloomberg, NIFTY Indices, Axis MF Research as on 28th February 2022

Note: For detailed asset allocation & investment strategy, kindly refer to scheme information document. Investors can also refer the index methodology of the NIFTY Midcap 50 Index on www.niftyindices.com

Product Labelling and Riskometer – Axis Nifty Midcap 50 Index Fund:

About Axis AMC: Axis AMC is one of India`s fastest growing assets managers offering a comprehensive bouquet of asset management products across mutual funds, portfolio management services and alternative investments.

Note: Market caps are defined as per SEBI regulations as below: a. Large Cap: 1st -100th company in terms of full market capitalization. b. Mid Cap: 101st -250th company in terms of full market capitalization. c. Small Cap: 251st company onwards in terms of full market capitalization.

NSE Indices Limited Disclaimer: It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by NSE nor does it certify the correctness or completeness of any of the contents of the Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of the 'Disclaimer Clause of NSE.

The Axis NIFTY Midcap 50 Index Fund offered by “the issuer” is not sponsored, endorsed, sold or promoted by NSE Indices Limited (formerly known as India Index Services & Products Limited (IISL)). NSE Indices Limited does not make any representation or warranty, express or implied (including warranties of merchantability or fitness for particular purpose or use) and disclaims all liability to the owners of Axis Nifty Midcap 50 Index Fund or any member of the public regarding the advisability of investing in securities generally or in the Axis Nifty Midcap 50 Index Fund linked to Nifty Midcap 50 Index TRI or particularly in the ability of the Nifty Midcap 50 Index TRI to track general stock market performance in India. Please read the full Disclaimers in relation to the Nifty Midcap 50 Index TRI in the in the Offer Document/ Prospectus/ Scheme Information Document.

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.

Disclaimer: This press release 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. 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. 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.

The information set out above is included for general information purposes only and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws as certified by the mutual funds consultant. Any action taken by you on the basis of the information contained herein is your responsibility alone. Axis Mutual Fund will not be liable in any manner for the consequences of such action taken by you. The information contained herein is not intended as an offer or solicitation for the purchase and sales of any schemes of Axis Mutual Fund.

Past performance may or may not be sustained in the future.

Stock(s) / Issuer(s)/ Top stocks mentioned above are for illustration purpose and should not be construed as recommendation.

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

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