Equity Market View

June 2023
Market Recap
Animal Spirits are back

Current • Indian markets staged a strong recovery last month, as markets digested
Market Snapshot 1 M Change
Level full year earnings & sentiments turned favorable.
Equity Markets
S&P BSE Sensex 62,622 2.5% • Market breadth remains sturdy while volatility declined further to multi-
year lows. Larger breadth in the market is positive for health of overall
NIFTY 50 18,534 2.6%
markets

Market Flows
FII Flows Rs 43,838 Cr • NIFTY is up 9.1% from its lows on 28-Mar; but the NIFTY mid-cap index
is up ~14% while the small cap index is up 15% over the same period.
DII Flows - Rs 3,280 Cr

External Trends • Since Jan-2020, mid-cap / small cap indices have outperformed the
NIFTY ~44/18% each.
USD/INR 82.68 1.1%
Brent Crude Oil (US$) 72.96 -8.3%
MCX Gold (INR) 60,133 0.4%

Source: NSDL, RBI, MCX, Bloomberg, Axis MF Research. Data as on 31st May 2023
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YTD India Recovers V/s EM
India had outperformed EM in 2022 by 25%

India Performance has recovered sharply since March 2023

115

110

105

101.05
100
100.39

95

90
Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23

MSCI India MSCI EM

Source: Bloomberg, Axis MF Research. Data as on 31st May 2023

Normalized values to 100 on base date of 31st Dec 2022. The above graph is used to explain the concept and is for illustration purpose only
and should not used for development or implementation of an investment strategy. Past performance may or may not be sustained in future. 3
GDP Growth @7.2%
India retains its tag as the fastest growing large economy

Economy
Segment Q2 FY 22 Q3 FY 22 Q4 FY 22 Q1 FY 23 Q2 FY 23 Q3 FY 23 Q4 FY 23
Mix
Consumption: Private expenditure 56.9% 14.2% 10.8% 4.7% 20.0% 8.8% 2.1% 2.8%

Consumption: Government expenditure 15.1% 11.7% 5.8% 11.8% 1.8% -4.1% -0.8% 2.3%

Investment: Fixed capital formation 24.6% 12.4% 1.2% 4.9% 20.6% 9.7% 8.3% 8.9%

Import 25.1% 27.8% 22.4% 19.7% 12.3% 11.3% 4.9%

Export 26.6% 19.7% 6.7% 33.7% 25.9% 10.9% 11.9%

Real GDP growth(%) 9.1% 5.2% 4.0% 13.1% 6.2% 4.5% 6.1%

Strong supply side pickup across sectors & Domestic factors counteracted a
investment led demand key drivers weak external market.

Source: Axis MF Research. Bernstein, Data as of 31st May 2023

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Earnings Round Up
Q4 Earnings in Line, Incremental growth likely to be in pockets

• Broad market revenue & profit growth was 11% & Broad market Earnings Recap Sep-22 Dec-22 Mar-23
22% YoY, respectively, with margin expansion
Consumer Discretionary 85% 51% 75%
• Consumer Discretionary reported highest Consumer Staples 10% 23% 25%
earnings growth followed by financials, while Energy -4% 5% 17%
Materials saw de-growth.
Financials 38% 41% 51%
Health Care 20% -4% 6%
Industrials 25% 56% 48%
Technology 12% 15% 13%
Materials -59% -50% -34%
Telecom Services -86% NM NM
Utilities 2% -23% 16%
Total -8% 2% 22%

About 60% mid-cap index stocks have beaten Bloomberg consensus

earnings expectations during the Q4 results season.

Source: Morgan Stanley, Axis MF Research, Data as 31st May 2023

The sectors mentioned herein are for general assessment purpose only and not a complete disclosure of every material fact. It should
not be construed as investment advice to any party. Past performance may or may not be sustained in future. 5
What’s behind the latest US Rally
7 stocks account for nearly all US Equities gains

Active Fund Management adding unique value over passive stories

Company YTD (%)

Nvidia Corp 169.15

Meta Platforms Inc 126.53

Tesla Inc 73.71

Amazon.Com Inc 47.92

Alphabet Inc 41.30

Microsoft Corp 40.51

Apple Inc 39.67

Nasdaq Index 33.50

MSCI USA Index 12.34

Source: Schroders, Axis MF Research. Data as of 5th June 2023.
Past performance may or may not be sustained in future. MSCI USA used as a proxy for the US large cap universe. The Stocks
mentioned above are used to explain the concept and is for illustration purpose only and should not be used for development or
implementation of any investment strategy. It should not be construed as investment advice to any party. The stocks may or may not be
part of our portfolio/strategy/ schemes 6
… US Debt Ceiling compromise
Kicking the can down the road

US Debt Outstanding
34,000
Debt ceiling
breached
32,000

Debt ceiling
30,000 breached
US$ Billion

28,000

26,000

24,000
Debt ceiling
breached
22,000

20,000
May-18 May-19 May-20 May-21 May-22 May-23

Source: Bloomberg, Axis MF Research. Data as of 5th June 2023.

The above graph is used to explain the concept and is for illustration purpose only and should not used for development or implementation
of an investment strategy. Past performance may or may not be sustained in future.
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& long-term challenges remain

US China Tensions High US Inflation Upcoming US Elections

Key US Events to watch for

It is possible that the Federal Reserve further raises interest rates over the summer. Investors may also start to pay greater attention to next
year’s US election. Much may change before Republicans and Democrats must choose their nominees.

US election could trigger an escalation of the long-running tensions between the US and China. This could depress the outlook for profits
and growth in both countries.

Source: Schroders, Axis MF Research

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9
 De-bottlenecking Story Underway
Policymakers focusing on supply side reforms, catalyzing
both public and private investment
Virtuous Investment Cycle

Public capex near 18-year high Private capex cycle Improving economic
and set to rise to 3.3% of GDP already underway sentiment creates
demand for products

High Corporate
capacity utilization

Additional Capex
undertaken

Source: CMIE, Axis MF Research Data as of 5th June 2023

Past performance may or may not be sustained in the future. The above graph is used to explain the concept and is for illustration
purpose only and should not used for development or implementation of an investment strategy. 10
 Making the case for India
Confluence of cyclical & structural tailwinds driving
recovery

PMI Indicators At all time highs Inflation has largely stabilized

65
7.5%

60
6.0%
55

4.5%
50

45 3.0%
Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23

Composite PMI Average CPI Inflation RBI Target

Cyclically stronger balance sheets, improving macro stability – which reduces pressure on policymakers to tighten policy
stance – and structural policy reforms are the keys to sustainable growth

Source: Bloomberg, Axis MF Research

Data as of 31st May 2023
11
The Quality & Growth Revival
Long Overdue, green shoots visible

Key Indicators
✓ Incremental capex spending setting the stage for
expansionary cycle Profit & ROE have improved drastically

✓ Larger companies better able to manage operational

risks to deflect challenging market conditions leading
to relative financial outperformance

✓ Government spending augmenting key supply

bottlenecks for a more sustained growth trajectory

X Debt servicing costs rise even as overall debt falls

X External challenges and demand remain focal point in

management commentary

Source: Citi, Bloomberg, Axis MF Research. Data as of 5th June 2023

Past performance may or may not be sustained in future. Stocks/sectors mentioned are for illustrative purposes only. The
representations should not be construed as recommendation or investment advice of any form. The above graph is used to explain the
concept and is for illustration purpose only and should not used for development or implementation of an investment strategy. 12
Quality Premia Returning
Consolidation of Multiples may now give way to a ‘Quality’ re -rating

India Quality has recovered meaningfully High growth, low margin stocks have de-
rated sharply
Quality as a style
120 outperforms all other 16x
styles YTD Average FY2 15x
115
14x EV/sales

110 13x
12x 12x
12x
105
10x High Growth
High Margin
100
8x
95
6x 6x
90
4x High Growth
85 Low Margin 3x
2x
80 Dec 18 Dec 19 Dec 20 Dec 21 Dec 22
Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 High Growth High Margin
Quality Value Momentum

Quality has seen a strong recovery backed by strong fundamentals and relative valuation discount

Source: Bloomberg, S&P BSE Indices, Axis MF Research Data as of 31 st May 2023
Past performance may or may not be sustained in the future. The above graph is used to explain the concept and is for illustration
purpose only and should not used for development or implementation of an investment strategy. Performance of styles derived from proxy
indices issued by Asia Index Private Limited. Values normalized to 100 as on 1st April 2022 13
 Recovery in Market Breadth
Broader markets leading market higher

YTD Mid/smallcaps have outperformed P/E's have normalized after strong earnings
largecaps
15% 45

10% 40

5%
35
0%
30
-5%

-10% 25

-15% 20
1 Month 3 Month 6 Month Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23
NIFTY 50 NIFTY Midcap 100 NIFTY Smallcap 100 NIFTY Midcap 100 P/E Average

Source: Bloomberg, Axis MF Research. Data as of 5th June 2023

Past performance may or may not be sustained in future. Stocks/sectors mentioned are for illustrative purposes only. The
representations should not be construed as recommendation or investment advice of any form. The above graph is used to explain the
concept and is for illustration purpose only and should not used for development or implementation of an investment strategy.
14
Challenges ahead
Possible headwinds coloring our view

15
2024 – An election year
Understanding the correlation between elections & Markets
Pre-election years performance
• Markets have historically had positive build-ups to election years (7/10 years) of the S&P BSE Sensex

• Losses in 1995 (-21%) and 1998 (-16%) came amid an unstable political scenario in 1983 7%
India while the other one was during the global financial crisis of 2008 when the
index crashed 52%. 1988 51%

• The recent elections in Karnataka and the resulting anti-incumbency wave pose 1990 35%
limited risks to equity markets.
1995 -21%
• However, markets have respected political stability and economic growth over which
1998 -16%
party comes to power. In effect, Indian politics is not a major driver of equity returns.
2003 73%
GDP growth dependant on global and domestic fundamentals
2008 -52%

2013 9%

2018 6%

2023 YTD 2%

Sensex Returns (%)

Source: Bloomberg, Ministry of statistics and programme implementation, CLSA, Axis MF Research. Data as of 31st May 2023.
Past performance may or may not be sustained in the future. The above graph is used to explain the concept and is for illustration
purpose only and should not used for development or implementation of an investment strategy. 16
Crude Oil
India’s Wildcard

Price of Crude is incrementally seen as a direct proxy to geo political tensions

For India, rising crude is the single largest economic risk
130

120

110

100

90

80

70
Feb-22 Apr-22 Jun-22 Aug-22 Oct-22 Dec-22 Feb-23 Apr-23 Jun-23
Brent Crude (US$)

Source: Bloomberg, Axis MF Research. Data as of 15th May 2023

The above graph is used to explain the concept and is for illustration purpose only and should not used for development or
implementation of an investment strategy. Past performance may or may not be sustained in future. 17
Portfolio Positioning
Where do we go from here?

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Portfolio Focus
Identifying relative winners
Business strategy and prospects Key Pillars of the Axis MF Approach
• Durable business mode
model
• Competitive strengths
• Long term track record

Focus on
Industry traits Expertise Quality -
• Growth potential through Investment
• Level of competition Experience Philosophy
• Entry barriers

Management team Axis MF

• Experience & track record Approach
• Width of talent
• Governance standards

Balance sheet
• Efficiency in managing capital Risk Consistency of
• Leverage Management business
• Profit margins prospects
• Cash flows

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4 Themes to Play
Key Focus Areas for 2023

Consumption – Rural Recovery: Capex Cycle and Credit Growth: Margin Risks: Flows and Global Backdrop:
• Normal monsoon predicted by IMD • Public capex cycle has improved in FY23; • Bottom-up earnings expectations for FY24 • USD decline is favourable for Emerging
we would watch for private capex recovery are baking in margin expansion as well as market inflows & India
• Potential pre-election budgetary support decent growth momentum.
for the rural economy, • Improving capacity utilization, a favourable • Should benefit (especially passive flows –
policy environment (PLI Schemes + • Risks to the downside given FY24E India’s weight in benchmark is at life
• Early green shoots in rural employment ongoing China+1 strategy), Consensus NIFTY EPS is well above the highs).
/wages could buoy consumption recent cross-cycle growth.
• Strong corporate b/s and cash flows, large • Active portfolios continue to remain
• Focus on Autos, Auto ancillaries and industries’ loan growth will favour this • Focus on finance & select consumer significantly underweight to EM
FMCG space names benchmark weights.

• Focus on construction, real estate and

chemicals

PLI – Production linked incentives

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Fund Valuations
May 2023

Net Revenue Operating Profit PAT

Fund Name
FY23 FY24E FY25E FY23 FY24E FY25E FY23 FY24E FY25E
Axis Bluechip Fund 24.0% 13.7% 10.9% 19.4% 16.3% 15.9% 24.9% 17.9% 16.7%
Axis Focused 25 Fund 23.5% 12.3% 11.9% 21.2% 17.7% 17.9% 21.3% 16.8% 15.9%
Axis Long Term Equity Fund 22.6% 13.3% 14.4% 15.2% 22.7% 20.2% 22.4% 19.5% 17.3%
Axis Flexicap Fund 24.4% 14.6% 12.8% 19.0% 17.5% 17.0% 28.1% 19.1% 17.4%
Axis Multicap Fund 23.3% 14.8% 13.7% 14.3% 17.3% 16.6% 29.0% 19.3% 17.2%
Axis Midcap Fund 22.7% 20.3% 16.0% 15.9% 22.1% 18.7% 29.6% 21.8% 19.1%
Axis Smallcap Fund 19.2% 7.4% 11.3% 12.6% -6.3% 16.3% 47.9% 40.4% 20.5%
Axis Growth Opportunities Fund 26.9% 18.8% 17.5% 12.3% 27.0% 21.4% 35.9% 21.8% 22.0%
Axis ESG Equity Fund 23.2% 13.4% 14.3% 15.1% 17.6% 17.1% 23.4% 16.4% 17.5%
Axis Special Situations Fund 22.7% 15.3% 12.2% 19.7% 18.5% 17.9% 24.9% 19.1% 17.5%
Axis Quant Fund 24.0% 11.2% 7.8% 17.9% 16.1% 11.5% 28.1% 19.1% 13.0%
Axis Business Cycles Fund 23.1% 9.6% 7.2% 13.3% 15.0% 11.6% 11.6% 20.9% 13.2%
Axis Equity Hybrid Fund 23.9% 13.3% 10.2% 20.4% 15.6% 15.4% 23.1% 16.6% 15.6%
Axis Children`s Gift Fund 24.0% 13.2% 10.4% 20.6% 15.6% 15.7% 21.8% 16.4% 15.6%
Axis Equity Saver Fund 23.8% 13.5% 9.7% 17.9% 15.9% 15.1% 19.2% 16.8% 15.9%
Axis Balanced Advantage Fund 24.9% 11.3% 10.5% 17.9% 15.2% 15.0% 24.2% 16.3% 15.7%
Axis Regular Saver Fund 23.8% 13.3% 10.6% 19.8% 15.7% 16.0% 21.8% 16.5% 15.9%
Axis Multi Asset Allocation Fund 23.8% 13.0% 10.0% 20.2% 15.4% 15.1% 21.8% 16.4% 15.5%
NIFTY 50 23.6% 10.9% 9.0% 17.6% 14.8% 13.9% 18.7% 16.5% 15.0%
BSE 100 24.0% 11.0% 8.8% 17.1% 15.0% 13.8% 18.2% 16.7% 14.8%
NIFTY 500 23.4% 11.0% 8.9% 16.1% 14.9% 13.8% 18.2% 16.7% 14.9%

Source: Axis MF Research. Data as of 31st May 2023

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Fund Valuations
May 2023
PE (x) P/B (x) ROE(%)
Fund Name
FY22 FY23 FY24E FY25E FY22 FY23 FY24E FY25E FY22 FY23 FY24E FY25E
Axis Bluechip Fund 33.2 26.5 22.5 19.3 4.6 4.1 3.7 3.3 13.9 15.5 16.3 16.9
Axis Focused 25 Fund 38.1 31.5 26.9 23.2 6.0 5.4 4.9 4.4 15.7 17.1 18.0 18.9
Axis Long Term Equity Fund 41.0 33.5 28.0 23.9 8.2 7.3 6.4 5.7 19.9 21.9 22.8 23.9
Axis Flexicap Fund 34.0 26.5 22.3 19.0 5.5 4.9 4.3 3.7 16.2 18.3 19.1 19.6
Axis Multicap Fund 28.9 22.4 18.8 16.0 4.9 4.3 3.6 3.1 16.8 19.2 19.4 19.6
Axis Midcap Fund 37.9 29.2 24.0 20.2 6.1 5.4 4.4 3.8 16.0 18.4 18.5 18.8
Axis Smallcap Fund 49.7 33.6 24.0 19.9 5.8 6.2 4.5 3.8 11.7 18.3 18.8 19.2
Axis Growth Opportunities Fund 50.9 37.4 30.7 25.2 9.1 8.3 6.6 5.5 17.9 22.1 21.4 21.8
Axis ESG Equity Fund 36.0 29.2 25.1 21.3 7.0 6.3 5.5 4.9 19.5 21.4 21.9 22.9
Axis Special Situations Fund 36.5 29.3 24.6 20.9 4.8 4.3 3.8 3.2 13.1 14.6 15.3 15.3
Axis Quant Fund 23.9 18.6 15.7 13.8 3.2 2.9 2.5 2.3 13.3 15.3 16.3 16.3
Axis Business Cycles Fund 27.4 24.5 20.3 17.9 3.3 3.0 2.7 2.5 11.9 12.2 13.5 13.8
Axis Equity Hybrid Fund 33.1 26.9 23.0 19.9 4.5 4.0 3.7 3.3 13.6 15.1 15.9 16.5
Axis Children`s Gift Fund 34.1 28.0 24.1 20.8 4.6 4.2 3.8 3.4 13.6 15.0 15.8 16.4
Axis Equity Saver Fund 29.4 24.7 21.1 18.2 3.7 3.3 3.0 2.6 12.5 13.5 14.0 14.5
Axis Balanced Advantage Fund 30.2 24.3 20.9 18.1 4.1 3.6 3.2 2.9 13.5 15.0 15.5 15.8
Axis Regular Saver Fund 32.7 26.9 23.0 19.9 4.6 4.2 3.8 3.4 14.1 15.5 16.3 16.9
Axis Multi Asset Allocation Fund 32.8 26.9 23.1 20.0 4.5 4.0 3.6 3.3 13.6 14.9 15.7 16.4
NIFTY 50 28.8 24.2 20.8 18.1 3.7 3.4 3.0 2.7 12.9 13.8 14.6 15.0
BSE 100 28.7 24.3 20.8 18.2 3.7 3.3 3.0 2.7 12.9 13.8 14.5 14.9
NIFTY 500 28.8 24.4 20.9 18.2 3.7 3.4 3.0 2.7 12.9 13.8 14.6 15.0

Source: Axis MF Research. Data as of 31st May 2023

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Fund House View
In Summary

Markets have re-ignited animal spirits after a strong earnings quarter and better than expected macro-economic data.

Our portfolios have tactfully navigated tough investing conditions and have now begun seeing a healthy risk-reward
payoff.

This is also reflected in near term outperformance across equity and hybrid funds.

Our portfolios today approach markets using a Multicap approach (mixing large cap stable growth low debt companies
& Mid & small cap high growth niche businesses).

The healthy breadth of the market requires larger more diversified portfolios to deliver alpha, which is reflected in our
granular portfolios.

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Product Labeling

24
 Product Labeling

*pursuant to change in fundamental attribute which was effective from April 27, 2023. Investors are requested to note that Domestic Price of Silver is
available from September 2022 since the inception of Axis Silver ETF. Hence, the existing benchmark for comparing with scheme returns is placed,
once we start building the data for Silver, we will keep updating the returns with revised benchmark. 25
Product Labeling

26
Disclaimer & Risk Factors

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

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.

27
Thank You