AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G)

Introduction

The AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G) is a target maturity debt fund designed to provide investors with a reliable, fixed-income option by investing in high-quality, AAA-rated non-banking financial companies (NBFCs). Aligned with the CRISIL-IBX AAA NBFC Index, this fund offers a diversified portfolio of debt securities with a defined maturity date of June 2027. It is ideal for investors seeking stable returns, low credit risk, and the opportunity to align their investment horizon with the fund’s maturity, providing predictability in income generation.

Details of AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G)NFO

Investment Objective and Strategy

Objective:

The investment objective of the scheme is to provide investment returns before fees and expenses that closely corresponds to the total returns of the securities as represented by the CRISIL-IBX AAA NBFC Index – Jun 2027, subject to tracking errors. 

There is no assurance that the investment objective of the Scheme will be achieved.

Investment Strategy:

The investment strategy of the AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G) focuses on replicating the performance of the CRISIL-IBX AAA NBFC Index by investing predominantly in a diversified portfolio of high-quality, AAA-rated debt securities issued by non-banking financial companies (NBFCs). The fund follows a passive approach, ensuring minimal tracking error by aligning closely with the index composition.

Key aspects of the strategy include:

• Target maturity: The fund aims to hold the investments until its maturity in June 2027, offering investors the benefit of predictable returns over the defined investment horizon.

• Credit quality: By investing exclusively in AAA-rated NBFC securities, the fund seeks to minimize credit risk, ensuring capital preservation and consistent income.

• Diversification: The portfolio is well-diversified across different NBFC issuers, reducing the impact of issuer-specific risks.

• Interest rate risk management: By aligning with the index and holding securities until maturity, the fund aims to mitigate interest rate fluctuations, offering potential stability in returns.

This strategy makes the fund suitable for investors seeking predictable, low-risk, and fixed-income returns over a medium-term horizon.

Why Invest in AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G)?

Investing in the AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G) offers several compelling benefits for fixed-income investors:

• High Credit Quality: The fund invests in only AAA-rated debt securities from non-banking financial companies (NBFCs), which ensures a high level of credit safety and lowers the risk of default.

• Predictable Returns: As a target maturity fund, it offers a defined maturity date of June 2027. This provides investors with a clear investment horizon and the ability to match their financial goals with the fund's maturity, allowing for predictable income.

• Low Credit Risk: By focusing exclusively on AAA-rated NBFCs, the fund significantly reduces credit risk, making it an attractive option for conservative investors seeking capital protection.

• Diversification: The fund’s portfolio is spread across multiple high-quality NBFC issuers, reducing the impact of any single issuer’s credit risk on the overall portfolio.

• Tax Efficiency: The fund’s long-term nature may provide tax advantages for investors, as it can benefit from indexation if held for more than three years, potentially lowering the overall tax liability on returns.

• Passive Management: The fund follows a passive investment approach, which minimizes tracking error and ensures that returns closely follow the underlying CRISIL-IBX AAA NBFC Index.

• Interest Rate Risk Mitigation: With its buy-and-hold approach until maturity, the fund helps investors manage interest rate volatility, offering stability in returns over the investment horizon.

This makes the AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G) an ideal choice for investors seeking stable, low-risk, and predictable fixed-income returns over the medium term.

Strength and Risks - AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G)

Strengths:

The AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund offers several strengths that make it a compelling choice for investors seeking a stable and low-risk fixed-income investment:

• High Credit Quality: The fund invests exclusively in AAA-rated debt instruments from well-established non-banking financial companies (NBFCs), ensuring strong creditworthiness and reducing default risk.

• Defined Investment Horizon: With a target maturity date of June 2027, the fund offers predictability in terms of returns and cash flow, allowing investors to align their financial goals with a specific time frame.

• Low Credit Risk: By focusing on top-rated AAA securities, the fund minimizes credit risk, making it an attractive option for risk-averse investors seeking safety of capital.

• Diversified Portfolio: The fund's portfolio is diversified across various AAA-rated NBFCs, reducing the impact of any single issuer’s performance on the overall portfolio and providing stability.

• Interest Rate Risk Management: As a target maturity fund, the fund follows a buy-and-hold approach, mitigating the impact of short-term interest rate volatility on returns and providing relatively stable income over the investment horizon.

• Tax Efficiency: If held for over three years, the fund offers the potential for long-term capital gains (LTCG) tax benefits, including indexation, which can reduce tax liability and enhance post-tax returns for investors.

• Passive and Transparent Management: The fund adopts a passive management style, closely tracking the CRISIL-IBX AAA NBFC Index, ensuring transparency and low management costs, which translates to better returns for investors.

• Liquidity: Though it’s a target maturity fund, investors have the flexibility to exit at any point during the fund's tenure, providing liquidity when needed without being locked in until maturity.

These strengths make the AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G) an excellent option for conservative investors seeking consistent returns, low risk, and alignment with a specific time frame.

Risks:

While the AXIS CRISIL-IBX AAA NBFC Index – Jun 2027 Fund - Direct Plan (G) offers several advantages, it is not without risks. Here are some potential risks investors should consider:

1. Interest Rate Risk
Although the fund aims to mitigate interest rate volatility by holding securities until maturity, changes in interest rates can affect the market value of the bonds in the short term. If an investor exits before maturity, they could face losses due to rising interest rates.

2. Credit Risk
While the fund invests in AAA-rated NBFC debt, which minimizes credit risk, it does not eliminate it entirely. A downgrade in the credit rating of an NBFC due to changes in its financial health could impact the value of the underlying securities, although the risk is relatively low given the AAA rating.

3. Liquidity Risk
Though the fund provides liquidity options, in times of market stress, NBFC bonds may become less liquid, making it harder to sell at favorable prices. This could affect investors looking to exit before the fund’s maturity.

4. Concentration Risk
The fund is concentrated in the NBFC sector. Any adverse developments in the NBFC space, such as regulatory changes or a sector-wide downturn, could impact the performance of the fund, even though it invests in the highest-rated issuers within this space.

5. Reinvestment Risk
As the fund holds fixed-income instruments, there is a possibility that interest and coupon payments from the securities may need to be reinvested in a lower interest rate environment, potentially impacting the overall returns.

6. Limited Growth Potential
As a debt-oriented fund, the potential for capital appreciation is limited compared to equity investments. The fund is designed for predictable income and capital preservation rather than high returns, which may not suit aggressive investors seeking growth.

7. Market Risk
Macroeconomic factors, such as inflation, changes in fiscal policy, or economic slowdowns, can impact the broader debt market, potentially affecting the yields and value of bonds held in the fund, especially if an investor redeems early.

8. Early Exit Risk
Investors exiting the fund before the target maturity may be exposed to short-term market fluctuations and interest rate risk, possibly leading to returns lower than expected or even capital loss.

Despite these risks, the fund remains a low-risk option for investors with a medium-term horizon, particularly those focused on capital preservation and predictable returns. However, investors should consider these risks before committing capital to ensure alignment with their risk tolerance and financial goals.