Equity Market Update. Oct 2021

Equity Market Update

Oct 2021

There is huge dispersion in returns even among large caps

2 Source: Bloomberg, Past performance may or may not be sustained in future. Data as on 31st Dec 2020

1 1 1

2.3 (8.6% CAGR)

10.9 (26.9% CAGR)

0.9 (-0.8% CAGR)

0 2 4 6 8 10 12

BSE100 Index Top Quartile Bottom Quartile

(INR Cr.)

Investment (Dec 10)

Value After 10 years (Dec 20)

BSE 100 Index

Growth has been a Consistent Performer

Source: Axis MF Research, Bloomberg. Data in INR. Past performance may or may not be sustained in future. Data as of 31^stMar, 2021.

• Growth has beaten Value in 7 out of 11 Years

• Value has outperformed Growth in CY20

50 100 150 200 250 300 350 400 450

Mar-10 Mar-12 Mar-14 Mar-16 Mar-18 Mar-20

MSCI India Growth Index MSCI India Value Index

An Ideal Philosophy for Wealth Creation

Quality Has Outperformed

4 Source: Axis MF Research, Bloomberg. Past performance may or may not be sustained in future. Data as of 31^stMar 2021. Sector(s) / Stock(s) / Issuer(s) mentioned above are for the purpose of illustration and should not be construed as recommendation.

Quality A Clear Winner High ROE Companies Have Done Well

Company ROE % 5 Yr CAGR

Bajaj Finance Ltd

21.2 48.9

Muthoot Finance Ltd

22.4 49.4

Astral Poly Technik Ltd

17.4 44.3

Aarti Industries Ltd

22.7 40.7

Ltd

18.7 42.0

Bajaj Finserv Ltd

14.3 40.3

Jubilant Foodworks Ltd

19.3 36.3

India Ltd

19.5 39.0

Company ROE % 5 Yr CAGR

Vodafone Idea Ltd

-38.1 -31.7

Union Bank of India

-6.8 -21.5

Punjab National Bank

-11.3 -14.2

Tata Motors Ltd

2.3 -13.5

Bank of Baroda

-1.7 -12.2

Indian Overseas Bank

-33.3 -11.5

IDBI Bank Ltd

-31.1 -11.0

Bharat Heavy

Electricals Ltd

-0.2 -7.6

0.00 20.00 40.00 60.00 80.00 100.00 120.00

S&P BSE 100 TRI S&P BSE 500 TRI S&P BSE Quality Index TRI S&P BSE Sensex TRI

• One should be cognizant of the fact that any market fall needs to be followed by a higher rise to get back to the starting point.

• It is very important to not just protect capital but also protect returns.

Recovering from drawdowns is tough

Source: Axis AMC Internal Research

Starting point % drop Required rise to go back to starting point

100 ^{5% 5.3%}

100 ^{10% 11.1%}

100 ^{15% 17.6%}

100 ^{20% 25.0%}

100 30% 42.9%

100 ^{40% 66.7%}

100 ^{50% 100.0%}

How can you manage successfully over long term?

6

Strong business model

Good ROE’s and cash flows Secular growth rate

of the sector (around 1.5 to 2x of GDP) Strong corporate

governance/

promoter pedigree

Focus on…

.. and be good risk managers

Sep 2021

Month at a glance

2.8%

5.9%

5.8%

2.7%

-2.6%

2.2%

7.6%

-2.9%

-1.7%

0.3%

Nifty 50 Index Nifty Midcap 150 Index Nifty Small Cap 250 Index SENSEX MSCI World Index (INR) MSCI India Index (INR) Crude - Brent (USD/Barrel) Gold/INR USD/INR EUR/INR

Source: Bloomberg. Past performance may or may not be sustained in future.

Indian Market Snapshot

8

Headlines index not representing the broader market Key Sector performance Market Volatility*

Source: Bloomberg, Value Research. Past performance may or may not be sustained in future. *Market volatility denotes 30 day standard deviation. Sector(s) / Stock(s) / Issuer(s) mentioned above are for the purpose of illustration and should not be construed as recommendation.

Sep 2021

2.9

12.4

58.5

7.1 13.1

80.5

6.2 12.3

88.7

1 Month 3 Months 1 Year

Nifty 50 TRI Nifty Midcap 100 TRI

Nifty Smallcap 100 TRI

12%

17%

22%

27%

32%

37%

42%

47%

7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000

May-20 Nov-20 May-21

Market volatility

Nifty 50 Market volatility

Index 1 month 1 year

S&P BSE Realty Index

S&P BSE Telecom Index

S&P BSE PSU Index

S&P BSE Power Index

S&P BSE India Infrastructure Index

S&P BSE Oil & Gas Index

S&P BSE Auto Index

S&P BSE CG Index

S&P BSE Bankex Index

S&P BSE FMCG Index

S&P BSE Finance Index

S&P BSE IT Index

S&P BSE Healthcare Index

S&P BSE Metal Index

India Top Performing EM is the Quarter

-20% -15% -10% -5% 0% 5% 10% 15%

MSCI India MSCI Indonesia MSCI New Zealand MSCI Malaysia -EM MSCI Singapore MSCI Taiwan MSCI Philippines

MSCI China A Onshore MSCI Thailand

MSCI Australia

MSCI AC Asia Pacific ex JP MSCI Hong Kong

MSCI Korea MSCI China

Source: Bloomberg. Past performance may or may not be sustained in future. Returns in USD

Globally Economies normalizing

10 Source: Bloomberg, GS, Axis AMC Research. *First principal component of 37 key weekly and monthly economic indicators

-20 -10 0 10 20 30 40 50

May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21

Current Activity Indicator*

Global Developed Emerging India US China Euro

Energy shock reeling across the globe

Natural Gas Futures up 400%+ YTD

Source: Bloomberg. Coal Prices - Australia Newcastle Port Thermal Coal 6000 kcal/kg FOB Spot Price Weekly. Natural Gas - ICE Futures Europe Commodities – Natural Gas Active Contract 0

100 200 300 400 500 600 700

Natural Gas Coal Brent Crude

Emerging Market Weekly Flows

Flows continue to strengthen on back of expected recovery

12 Source: Bloomberg, Axis AMC Research.

-150000 -100000 -50000 0 50000 100000 150000 200000 250000 300000

16-Dec-20 16-Jan-21 16-Feb-21 16-Mar-21 16-Apr-21 16-May-21 16-Jun-21 16-Jul-21 16-Aug-21 16-Sep-21

Emerging Market Weekly Flows

Global Cues

Developed market shares were flat in Q3. Declines in September erased prior gains.

The US Fed stated in September that tapering of quantitative easing =) will be announced at the November meeting and will finish by mid-2022.

Emerging market equities underperformed amid a sell-off in China.

The Evergrande situation sparked global investor concerns over potential spill over risks.

Concern over continued supply chain disruptions, and worries over the implications of higher food and energy prices remained key drivers

Source: Schroders, MS, Axis MF Research. Data as on 12^thOct, 2021

Current Status

14

• Source: Bloomberg, Data as on 12^thOct, 2021

0 50,000 1,00,000 1,50,000 2,00,000 2,50,000 3,00,000 3,50,000 4,00,000 4,50,000

0 50,00,000 1,00,00,000 1,50,00,000 2,00,00,000 2,50,00,000 3,00,00,000 3,50,00,000

4,00,00,000 India Cases

India Daily Cases India Cases

% of population

Countries and regions

Doses administered

Enough for % of people

given 1+

dose

fully vaccina

ted

Daily rate of doses administere

d

Mainland China

2,221,558,243 79.3 82.5 74.8 1,113,678

India 958,807,248 35.1 50.0 19.6 6,227,985

EU 575,492,075 64.8 68.6 65.8 909,976

U.S. 401,819,240 62.7 65.3 56.4 1,028,473

Brazil 249,340,259 60.3 73.5 47.4 3,774,133

Japan 174,631,850 69.2 73.8 64.6 1,026,068

Indonesia 158,872,130 29.8 37.5 21.6 1,558,275

Turkey 112,666,626 67.7 65.5 55.6 274,424

Germany 109,044,503 65.6 68.6 65.3 141,240

Mexico 107,154,354 42.0 52.0 38.0 685,420

France 96,292,913 74.3 78.1 75.9 161,073

Global Vaccination Campaign

Source: GS, Bloomberg, Axis AMC Research. Past performance may or may not be sustained in future.

Vaccination Supply More than 55% of the population vaccinated (7/Sep/21)

Vaccination to ramp up

Source: GS, Bloomberg, Axis AMC Research. Past performance may or may not be sustained in future.

Manufacturing impact milder Things starting to get back to Normal

Impact of Lockdown

Then and now

16

2.1 1.8

1.5 1.5 1.6 1.4 1.6 1.6 1.6 1.6

2.2 2.4

0.0 1.0 2.0 3.0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

% of GD P

Budgeted Infra spending to rise sharply

Infrastructure Spending

Higher Capex spending & Infrastructure at the expense of fiscal management

Government’s Capex Push

• The budget outlines a new National Infrastructure pipeline comprising of 7,400 projects.

• The comprehensive plan also includes an asset monetization game plan comprising of assets including airports, toll roads, rail infra assets, warehousing assets of CPSE’s and even sports stadiums.

• Development financial institution (DFI) with a proposed capital infusion of Rs 20,000 crore.

• Allocation to public infrastructure and healthcare increased to unclog supply bottlenecks

3.5 3.5 3.4

4.6

9.5

6.8

0.0 2.0 4.0 6.0 8.0 10.0

2017 2018 2019 2020 2021 (RE) 2022 (BE)

% of GD P

Fiscal Deficit gets bigger

Source: Union Budget Documents 2021, Citi, Axis MF Research

• Over 8 Bn USD raised in IPO so far this calendar year

• Further listings are expected to continue the trend

Strong IPO season

18 Source: GS, Bloomberg, Axis AMC Research. Past performance may or may not be sustained in future. Data as on 30^th Sep 2021

Strong trends in Technology and Consumer

Q1FY22 results in line mostly

Source: Morgan Stanley, Bloomberg. Past performance may or may not be sustained in future. Sector(s) / Stock(s) / Issuer(s) mentioned above are for the purpose of illustration and should not be construed as recommendation.

In Summary

Outlook

20

P ri ma ry ma rk e ts a re p o is e d to c re a te a s ig n if ic a n t fr e s h s u p p ly fo r In d ia n c a p it a l ma rk e ts

Large private equity &

VC backed companies are scheduled to raise in excess of Rs 40,000 Cr from the markets over the next 2 months.

While we anticipate many of these

companies to be priced well, we will remain cautious in our participation.

S tr o n g F P I P a rt ic ip a ti o n

India has been the top performing EM this year and is still poised very attractively to FPIs

We have seen over 2.5 Bn USD net inflow in October and close to 5 Bn over the Quarter.

We expect this trend to continue.

Global events and China market

drawdown has also started some

reallocation of capital.

Ma c ro

Liquidity normalization has begun with the latest MPC

Rate normalization to resume in the next few months

Anticipate a gradual rise in yields and a

calibrated phasing out

of the accommodative

monetary stance.

Selecting the right allocation for the investor

The funds may additionally hold 0-10% REITs & Invits. Note: Allocation and strategy is based on the current market conditions and is subject to changes depending on the fund manager’s view of the markets. For exact asset allocation please refer SID. 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

Axis Flexi Cap Fund

• Best Ideas across market segments

• Looks for stocks that are expected to report the faster growth relative to the

benchmark.

Axis Growth Opportunities Fund

• Gives the benefit of global diversification

• Lower correlation among asset classes makes them act well as a counter to each other

Axis Mid Cap Fund

• Emerging fast growing companies

• Access to breadth of

opportunities not available in the large cap space

Large Cap Equity

• Min 35%

Mid Cap Equity

• Min 35%

International

• 20-30%

All Cap Equity

• 100%

Midcap Equity

• Min 65%

Fund Name Riskometer Product Labelling

Axis Flexi Cap Fund

(An open ended equity scheme investing across large cap, mid cap, small cap stocks)

This product is suitable for investors who are seeking*

• Capital appreciation over medium to long term

• Investment in a dynamic mix of equity and equity related instruments across market capitalization.

This product is suitable for investors who are seeking*

• Capital appreciation over long term

• Investing predominantly in equity & equity related instruments of Mid Cap companies.

Axis Midcap Fund

(An open ended equity scheme predominantly investing in Mid Cap stocks)

Axis Growth Opportunities Fund

(An Open-ended Equity Scheme investing in both large cap and mid cap stocks)

This product is suitable for investors who are seeking*

 capital appreciation over long term

 investment in a diversified portfolio predominantly

consisting of equity and equity related instruments both in India as well as overseas

Product Labelling

37

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

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.

Disclaimer & Risk Factors

39