Axis Mutual Fund Makes Defensive Move Amid Global Trade Uncertainty
In light of the rising global trade tensions in the wake of the new tariffs announced by the United States, Axis Mutual Fund has realigned its investment approach towards domestic industries at the expense of exposure to export-related sectors. The nearly $38 billion asset manager is going defensive as it confronts higher volatility and ambiguity in global trade policy.
Export-oriented industries such as information technology and auto ancillaries also face greater threats because of the likelihood of retaliation, legal disputes, and reducing world demand. Furthermore, businesses in these industries are also unwilling to make long-term strategic decisions, such as establishing new factories or changing supply chains, as future policy contours are uncertain. Short-term tariff volatility is also causing postponement in business decisions, as firms are not clear about future policy shifts.
As a counter to such challenges, Axis Mutual Fund has been cutting down its exposure to export-oriented industries and increasing its exposure to domestic industries. The fund is prioritizing financial services, consumer companies, and infrastructure, as these sectors are less exposed to global trade movements and offer better consistency of earnings in the current market scenario.
A disciplined valuation strategy remains a key component of this strategy. The fund has been worried that many stocks are still valued on pre-pandemic assumptions and fail to account for world economic growth deceleration at the structural level. Investors are being called to rethink high valuations, particularly in sectors like IT, where long-term growth rates have come back to lower levels.
The IT industry, specifically, has been subjected to stress in light of its reliance on US and European-based clients. In uncertain times, any reluctance in decision-making on the part of international clients has traditionally affected the industry, irrespective of its valuation thresholds.
In a market situation where emotions take over from fundamentals, Axis Mutual Fund is concentrating on stability and long-term clarity of earnings instead of short-term speculative gains. The fund advises investors to pay more attention to domestic sectors and adopt a two-to-three-year long-term investment approach to navigate successfully the current market volatility.
