Axis Banking Debt Fund

Aims to generate stable returns by investing predominantly in debt & money market
instruments issued by banks.

Positioned to try & capture the compression in the spread of 1 year Bank CDs over the
overnight rate*
Opportunity to
tactically take
advantage of
prevailing yields
without compromising
on liquidity

Why
Invest?

High quality
portfolio comprising
of Banks
*Note: Positioning is based on the current market conditions and is subject to changes depending on the fund

managers view of the fixed income markets. Please refer the scheme information document for detailed information.
The objective stated herein may or may not be achieved by the Scheme/Fund Manager.

Suitable for
Institutional Investors
& FMP Investors
seeking liquidity

Bank CD Spread Analysis

Demand supply dynamics

Trend shows additional supply of CDs in January-March quarter
Reduction in supply in April-June quarter
Rs bn
Outstanding
CD's
2015
2014
2013
2012
2011
2010

Jan

March

2,619
3,277
3,328
4,030
3,614
2,642

3,291
3,981
3,931
4,403
4,445
3,418

Net change in CD
supply
672
704
603
373
831
776

Outstanding CD's

March

June

2015
2014
2013
2012
2011
2010

3,291
3,981
3,931
4,403
4,445
3,418

2,306
3,376
3,645
4,252
4,211
3,424

Net change in
CD supply
-985
-605
-286
-151
-235
5

Negative indicates fall in supply of CDs

Liquidity tightness usually in March on account of:

advance tax outflows
credit growth
high government balances to manage fiscal deficit

Year-end targets of PSUs/ private banks have traditionally lead to additional supply of Bank CDs in Q4

Average banking system liquidity improves significantly month-on-month in April

Government spending, G-sec maturities & coupon inflows

1 year spreads are expected to compress in April due to typical liquidity easing in April and reduced
supply of 1 year CDs

Source of Data: RBI WSS. Please note the table above is historical data which may or may not occur in future. .

on account of

Historic experience suggests 1-year spreads decline in April

Analysis over a period of 4 years shows yields rise in March and fall in April
This may be seen across rate cycles
2012: Rate Cut Cycle

8.6%

10.7%

8.4%

2013: Rate Cut Cycle

9.6%

7.8%

9.2%

7.7%

8.8%

7.6%

8.4%

7.5%

8.0%

7.4%

8.2%

10.3%

8.0%
9.9%

12 month CD rate (LHS)

26-Apr

19-Apr

12-Apr

5-Apr

29-Mar

22-Mar

15-Mar

Repo Rate (RHS)

8.00%

9.00%

2014: Stable rates

9.90%

8-Mar

26-Apr

19-Apr

12-Apr

5-Apr

29-Mar

22-Mar

15-Mar

8-Mar

7.6%
1-Mar

9.5%

1-Mar

7.8%

2015: Rate Cut Cycle

8.70%

7.75%
8.00%

9.60%

8.50%

7.50%

Source of Data: Bloomberg Please note the data above is historical data which may or may not occur in future.

27-Apr

20-Apr

13-Apr

6-Apr

30-Mar

23-Mar

16-Mar

9-Mar

2-Mar

28-Apr

21-Apr

7.00%

14-Apr

8.10%

7-Apr

6.00%
31-Mar

9.00%
24-Mar

7.25%

17-Mar

8.30%

10-Mar

7.00%

3-Mar

9.30%

Historic experience suggests 1-year spreads decline in April

Average banking system liquidity improves significantly month-on-month in April
on account of Government spending, G-sec maturities & coupons & inflows

Government may carry huge government balance in March which would flow into the banking
system in early April

Analysis over the last 4 years shows absolute fall in levels of 1 year Bank CD rates by 50 -100 bps
in less than a months time (refer slide 4)

Banking liquidity improves by more than ~1 trillion every year

Daily LAF (in Rs. Bn)
Month

Increase in Liquidity
(in Rs. Bn)

March

April

2009

(89)

1,293

1,382

2010

(5)

1,197

1,202

2011

(1,494)

721

2,215

2012

(2,093)

(792)

1,302

2013

(2,210)

(714)

1,496

2014

(2,684)

(988)

1,696

2015

(2,008)

(430)

1,578

Source of Data: RBI, WSS, Internal Analysis

Lower inflation creating room for further rate cuts

RBI will seek to bring the inflation rate to the mid-point of the band of 4 +/- 2 per cent provided for in
the agreement, i.e., to

4 per cent by the end of a two year period starting

fiscal year 2016-17

From the statement by RBI Governor on Monetary Policy, 4th March 2015

CPI Inflation

10.0

Repo Rate

9.0
8.0
7.0
6.0

6.75%

5.0
4.0

Source of data: Bloomberg, Statement by Dr. Raghuram G Rajan, Governor on Monetary Policy on 4th Mar 2015

Jan-16

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Mar-14

Jan-14

3.0

Statutory Details and Risk Factors

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. This document does not constitute advice to buy/sell any scheme of Axis Mutual Fund. 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 material is prepared for general communication and should not be
treated as research report. The data used in this material is obtained by Axis AMC from the sources which it considers
reliable. While utmost care has been exercised while preparing this document, Axis AMC does not warrant the
completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of
this information. Investors are requested to consult their financial, tax and other advisors before taking any investment
decision(s). 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.
Data as on January 29th 2016