Axis Business Cycles Fund – A thematic fund aiming to get investors a spot on India’s growth bandwagon

More Indians than ever before (probably) are taking a keen interest in their wealth creation journey. Instead of simply setting a portion of their income aside or in a savings account, we are seeing a huge influx of individuals who are aiming to invest their money prudently.

Investors need to consider a macro approach wherein they are focusing on assessing the industry and then taking prudent well-thought out investments into specific companies. This, of course, is easier said than done! That’s where a business cycles fund comes to the rescue. Simply put, it identifies the right portfolio of companies with the right business cycle tailwinds and invests in them at the right time.

To help investors invest in this fast emerging category, Axis Mutual Fund is launching a new thematic fund, the Axis Business Cycles Fund. It is an open ended equity scheme following business cycles based investing theme. The fund will have a cycle-driven portfolio and the flexibility to be more aggressive in terms of overweight and underweight across sectors. Axis Business Cycles Fund has a bottom up approach and follows the Quality style of investing and offers no market cap bias to investors.

To decode Axis Business Cycles Fund and understand the nuances of leveraging business cycles, we spoke to Ashish Naik, Equity Fund Manager, Axis Mutual Fund. Here are the key takeaways from the conversation.

Why business cycles funds?

India is currently at a promising position, between an expansion and peak phase when looked at through a business cycle lens. Multiple levers are beginning to fall in place for investment cycle pick-up in the country, making this particular investment tool apt for the times.

However, identifying a business cycle is the art of identifying several indicators and then framing an investment opinion from a plethora of data points as well as indicators.

“Our job is to cut through the noise and use only those indicators that best represent both, the health of the economy as well as the underlying investment thesis,” said Ashish.

For example, pharmaceutical companies tend to outperform during recessionary times, while cyclical companies like automakers tend to do well when the economy is expanding rapidly, he said, talking about how certain companies and sectors perform differently in each phase of the economic cycle.

“A typical business cycle fund tries to identify the current phase of the economic cycle, narrows on sectors that can perform in that phase, and then chooses companies within those sectors. The fund, therefore, could provide investors with the opportunity to ride the economic wave by being invested in companies that are expected to take full advantage of the macro environment,” he added.

He also pointed out that these funds look to restructure portfolios once the business cycle plays out. This means the investors can benefit from transitions to new portfolios based on the changing business cycle.

What makes Axis Business Cycles Fund stand out from the rest?

Axis Mutual Fund has a bottom up approach focusing on appreciation potential of individual stocks from a fundamental perspective. It follows the quality style of investing and offers no market cap bias to investors. It will also have the flexibility for a more aggressive stance for over or under-weight sectors.

“In expansionary times, we would focus on building a cyclical sector-based portfolio of companies which would benefit from an impending favourable upcycle,” he said.

“During slowdowns or uncertain times, the portfolio will tend towards counter cyclical themes, companies that are going to be in a better position to navigate tougher times,” he added.

Ashish also spoke about the potential risks associated with a business cycle and how the fund hopes to address it.

“A major risk in investing in a business cycles fund is timing. The phases in the business cycle may change quickly. And in this situation, the fund manager needs to react to these changes and make appropriate investment calls to prevent losses from downsides,” he said.

“When we find an opportunity within a sector, we will try to build a bigger position in that portfolio showing our high conviction. Equally importantly, would be to try to cut our weightages as the investment story plays out, and we move on to the next sector with an eminent business favourable upcycle,” he added.

How can one invest in the fund?

With a minimum application of Rs 5,000 and in multiples of Rs 1/- thereafter, the Axis Business Cycles Fund follows the same process as any other mutual fund.

“The New Fund Offer (NFO) will run from February 2^nd to 16^th, 2023. Once the allotment is completed, the fund becomes open for regular subscriptions and redemptions on a daily basis,” said Ashish.

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

^{Source: Axis MF Research as on 31st Dec, 2022} 

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