'Pace of market rise has been a surprise'

Chandresh Nigam, MD & CEO, Axis Mutual Fund, tells Renu Yadav that the secret to their success is delivering sustainable long-term performance and having a simple and effective product basket.

Certainly, the pace at which the market has run up in 2017 has been a surprise. There are two parts to this rally. First, there is greater conviction in the Indian economy's trajectory and the government's ability to deliver structural reforms needed to push growth higher. Second, globally, risk assets such as equities have done well across the board (in both developed and emerging markets) with investors looking to add risk. India has benefited from this. While the India story is more structural, and we have higher conviction in it, potential short-term reversals in global fund flows present some risk to the market.

Earnings have been affected by the macro situation in the last few years. Higher idle capacity and indebtedness have hurt companies. These conditions are reversing. We have already seen fall in commodity input costs and lower interest rates improve margins. Going forward, we expect to see a jump in demand that can push sales growth higher. This has the potential to really kick-start the earnings growth cycle. We believe we should see this happen over the next one-two years.

While sentiment does play a part in subscription numbers or the extent of listing gains, what needs to be acknowledged is the quality of companies hitting the market. Most of these are established and profitable businesses. In many cases, we have also seen new sectors becoming available. In general, these gains are not a surprise with the good response that some of the issues have got.

The key aspect of any dynamic strategy is the basis on which the equity allocation is decided. We believe we have created a robust and differentiated approach with the model that we have put together to arrive at the appropriate equity allocation. The key aspect of the model is that it follows a composite approach that relies on not just one variable but a combination of valuation, technical and risk factors to decide the optimal allocation.

Dynamic equity funds have the ability to offer a good risk-adjusted return based on their ability to adjust equity exposure. This should allow them to have significantly lower downsides compared with pure-equity products. A relatively risk-averse investor can have his entire equity exposure through Axis Dynamic Equity Fund

It is our belief, backed by external research that we have carried out, that planning for children's future is the key financial goal of any parent. However, because of the plethora of funds, people get confused about how to go about making and executing the plan. Our objective was to have a clearly targeted product that makes it easier for people to invest for this objective.

We are quality-biased long-term fund managers who are extremely sensitive about delivering sustainable risk-adjusted performance. Our process reflects this objective. We have stringent criteria to decide which stocks get included in our universe.