AXIS SHORT TERM PLAN : AN INVESTMENT OPPORTUNITY
I have been recommending investments in AXIS STP since their NFO on January 20’2010. Since then, I have recommended this scheme from time to time as the Fund Manager has stuck to his mandate & delivered performance over various time horizons:
| Purchase Date | Current Date | Period | % Return |
| 20-Jan-10 | 13-May-10 | 113 | 5.67 |
| 11-Feb-10 | 13-May-10 | 91 | 6.66 |
| 15-Mar-10 | 13-May-10 | 59 | 7.56 |
| 13-Apr-10 | 13-May-10 | 30 | 8.56 |
| 22-Apr-10 | 13-May-10 | 21 | 7.15 |
Current Parameters of AXIS Short Term Plan ( as on May 11’2010):
| Mod duration | 1.10 Years |
| Gross Yield | 6.25% |
| Credit quality | 100% AAA |
Portfolio Composition as on 20th April:
| CDs | 74% |
| Bonds | 25% |
| Cash | 1% |
Post RBI Policy Review in April, with lower than expected rate hikes, debt markets rallied for some time as is evident from below yields. However, with Government spending more than their current borrowing ( thereby going negative with their account with RBI by almost Rs.30,000 crs) & hence the funds from 3 G Auction getting transferred to Govt coffers for some more time ( till it starts spending again); markets gave up some early gains & yields started inching up:
| AAA Bond | 19th Apr
(Before RBI Policy) |
5th May | 12th May |
| 1Y | 6.60 | 6.10 | 6.23 |
| 1.5Y | 6.75 | 6.35 | 6.60 |
| 2Y | 7.20 | 6.71 | 6.93 |
| 3Y | 7.68 | 7.15 | 7.30 |
Yield Curve still remains very steep; giving ample opportunity for the Fund Manager to:
- Capture higher yields by increasing average maturities marginally
- Roll down effect will help the current portfolio of almost 74% in high yielding March CDs. New MTM guidelines will help boost NAVs of the scheme due to current in built profit in the scheme even if the Fund Manager does not book profits. Post July 01’2010 all the securities beyond 91 days in maturities will have to be marked to market; thereby boosting NAV of such schemes
- Ample cushion available in the current portfolio construction if there is a rate hike between now & July with 74% of the portfolio in high yielding CDs
- Higher yields in 1-3 year papers will help Fund Manger to capture higher yields for fresh inflows
- 3G money transfer effect on liquidity, even if it actually transpires, is likely to be a short-term phenomenon. RBI, in its annual policy, has acknowledged the need for “supportive” liquidity conditions so that Government’s borrowing program is not hampered. Also, credit-off take tends to be relatively lower in first half of financial year.
All the above points augur very well for both existing investors as well as new investors to invest in the said scheme.
Current Steepness in the market:
| 1 Day | 3.50% |
| 3 Mths | 4.25% |
| 6 Mths | 5.50% |
| 1 Year | 6.25% |
| 2 Years | 6.75% |
| 3 Years | 7.25% |
I would strongly advise investment in the said scheme with at least 6 month investment horizon.
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