Axis Mutual Fund has strategically raised the overseas allocation within its Axis Large & Mid Cap Fund to 9%. This move is primarily driven by the emerging investment opportunities presented by the artificial intelligence (AI) theme and the relatively attractive valuations observed in certain global markets.
Despite this increased exposure, the fund house indicated a cautious stance regarding the high valuations prevalent in some international sectors, particularly those closely linked to AI. The decision reflects a dual strategy of leveraging long-term diversification while remaining vigilant about market conditions.
Global Strategy and Schroders Partnership
Axis MF's international investments are guided by expertise from Schroders Investment Management, employing a high-conviction alpha strategy. This approach focuses on identifying companies whose current share prices do not fully reflect their long-term growth potential and are expected to deliver earnings growth above market consensus over the next three to five years. Furthermore, adherence to material environmental, social, and governance (ESG) standards is a key criterion for selection.
The fund believes that global markets currently offer a more balanced profile of valuation and growth compared to domestic markets, making a compelling case for diversified geographic allocation to enhance long-term returns. The current 9% overseas allocation is supported by favorable tailwinds in the AI space, though the fund will monitor valuations before considering further increases.
Domestic Portfolio Adjustments
Alongside its expanded global footprint, Axis Mutual Fund has also reconfigured its domestic portfolio in response to recent market volatility. The fund has increased its allocation to sectors such as electrical equipment, auto components, and industrial products. These adjustments are aligned with themes like electric vehicle adoption, power infrastructure spending, and supply-chain diversification within India.
Conversely, the fund has reduced its exposure to select mid-cap banks and pharmaceutical companies, shifting resources towards higher-conviction domestic investment ideas. The overall portfolio has become more concentrated, with the number of holdings decreasing from 96 in December 2025 to 86 by the end of May 2026. Despite these changes and the increased overseas exposure, the fund maintains a large-cap bias in its domestic portfolio, prioritizing market leaders and businesses with superior earnings potential.
Outlook and Investment Philosophy
Looking ahead, Axis Mutual Fund plans to continue its focus on domestic manufacturing, export-oriented businesses, and healthcare services. Its overarching investment style remains a bottom-up stock selection approach, emphasizing quality businesses. The fund will continue to exercise vigilance on valuations across both domestic and international markets to navigate potential risks effectively.