Interview

It is only when the economy reaches a particular growth rate that everybody starts to derive gains out of it. For example, at 5% GDP only 30 per cent of the companies will do well and at 8% GDP probably all the companies will start doing well. It is going to be a slow transition.

Chandresh Kumar Nigam
MD & CEO, Axis AMC

Your fund is among the few that has performed well despite headwinds faced in the market. What has helped you post such an amazing performance?

Our focus on sustainability and quality has helped us deliver results. Whenever you are buying a business you are buying at certain multiples. This in simple terms means you are paying for 10 or 15 years of earnings today in terms of price. But how do you know if these companies are going to be able to deliver or even remain in existence for that long a period? Therefore, sustainability is the first thing that we see while all the other aspects come later. Overall, we are looking for companies that are not only long-term prospects but are also able to grow and do better than what they are doing now. This philosophy, supplemented by our processes and disciplined approach, has helped us select quality stocks for our portfolios. And the market has rewarded that.

Do you take cash calls on your funds?

We don’t really target cash level for a fund. Cash is more of a residual outcome of our investment process and decision-making. In some of our funds we get significant inflows which we have been deploying on a steady basis keeping in mind how the economy and stocks in our portfolio are performing. We also have to look at how the valuations are evolving in a dynamic market. Our investment call is based on such parameters. In other funds, the cash level is quite limited. Hence, to summarise, we do not believe in taking cash calls in our funds. From the perspective of our fund house, it is the overall beta and risk of the portfolio which is more important. We thus give priority to risk management.

Following the huge underperformance of the broader market in large-cap, do you see prospects of revival in small-cap and mid-cap funds this year?

I think there will be some improvement but it won’t be immediate because the economy will recover slowly. But yes, we are optimistic on that front. I believe the economy has touched its bottom and from here on the data will only get better. And as the economy begins its upswing you will find companies recovering on account of the benefits that will come their way. This may give the desired push to the broader market. The actual impact will depend on the speed of recovery.

If the recovery is gradual than some of the bigger and stronger companies will do better and that may include mid-cap and small-cap companies. However, the bottom line is that the recovery will not be broad. It is only when the economy reaches a particular growth rate that everybody starts to derive gains out of it. For example, at 5% GDP only 30 per cent of the companies will do well and at 8% GDP probably all the companies will start doing well. It is going to be a slow transition.

When it comes to equity mutual funds, we see that you have not yet ventured into the thematic and sectoral space. Is there any reason?

We do not believe in sector funds. We want to get into areas where an investor is interested in investing for the long run. We want investors to get into products where they remain invested for 5-10 years. There is no point in getting into a product where after two years you tell them that this sector is no more in focus.

What is the reason that you have not yet been ‘active’ in the passive investment space? And do you believe that in India active will continue to dominate passive investment?

We understand that there are investors who are interested in passive products and we will be adding to our offerings to cater to them. Nevertheless, the way we see it, our active funds are doing very well and our investors can have a better investing experience in active funds from both risk and return perspective. If we can deliver on this consistently, it will continue to be a better outcome for the investors. Recently, we launched the Nifty 100 Index fund which we think is one of the best passive options for investors looking for large-cap allocation. Going forward, you will see us come up with more innovative ideas in this space.

"Stick to asset allocation. This is one mantra that has always worked. Just stick to your long-term asset allocation and rebalance it once in a year or may be once in two years. "

You have recently launched Axis All Seasons Debt FOF. What is the idea behind it and who should invest in this fund?

This fund can be a game-changer for debt investing in India. The fund is targeted towards debt investors who are not able to take a call on which segment is right for them at any time. Sometimes duration works, sometimes credit works, sometimes you want yields and sometimes the best ideas change within a few months. For a normal investor it becomes difficult to keep track and to capture these movements in their portfolio.

The idea behind this fund is that the investor can let us take the call on their behalf. And we can carry out rebalancing in a more tax-efficient manner as well. The biggest thing is that the allocations are not just limited to Axis funds but can be allocated to good quality funds by any other AMC as well. Thus we are making debt investments very easy for investors who may otherwise find it too complex. If you want one debt fund to own, this is the fund that you should opt for. We will take all the hassle away from you.

"It is the shorter duration products that may do well. Apart from this, credit spread is reasonably good which again reflects good opportunity. "

How do you look at debt market in the year 2020?

We are reasonably bullish about economic recovery and hence duration is not going to be a big story. The interest rate has been cut substantially and there is not too much scope for any further reductions. In that case, it is the shorter duration products that may do well. Apart from this, credit spread is reasonably good which again reflects good opportunity.

Do you think the spectacular performance of international funds in 2019 will be repeated this year? Should such funds be in an investor’s portfolio?

While global stocks have done well off late, we want investors to not focus too much on short-term performance. Instead, they should look for long-term strategic opportunities. Global markets give you access to a number of high-growth sectors and themes that are not available in India. We as a fund house are extremely bullish on this space and are looking at a number of options for the investors. We already have one fund which has done well and with our latest offering – Axis ESG Equity Fund – we may invest 30 per cent of the corpus in international companies.

What will be the growth strategy of the fund house going ahead?

Our strategy is very simple. Our business will grow if we satisfy our customers and give them the right products and a good experience. Till now, all the products have worked well for us. We will continue to do this and hope that the customers will place their trust in us. There are other aspects to the growth plan but the heart of the strategy is to give good investment outcomes to investors.

What advice would you give to retail investors for the new decade?

Stick to asset allocation. This is one mantra that has always worked. Just stick to your long-term asset allocation and rebalance it once in a year or may be once in two years. This helps you to reap an advantage when the markets are low. The difficulty is that it seems counter-intuitive to invest more in an asset class when the markets are low and your investments are not doing well. Nevertheless, it works well if you can do it without having any behavioural bias.