Axis Mutual Fund has shifted its portfolios towards consumption-oriented sectors and large-cap financials after increasing exposure over the past six months, while continuing to back the long-term manufacturing theme despite elevated valuations.
Shreyash Devalkar, Head of Equity at Axis Mutual Fund, which managed $39.61 billion in assets during the April-June 2026 quarter, said the fund's positioning reflects improving prospects for consumption-linked businesses after a prolonged period of underperformance.
"We have been increasing since the last six months in this space," Devalkar said, referring to financials and consumption-oriented stocks. He added that these sectors had lagged for the last two to three years, creating opportunities as growth conditions improve.
According to Devalkar, improving nominal gross domestic product (GDP) growth and coordinated measures by the government and the central bank are supporting consumption and financial services.
While constructive on consumption, Devalkar said the fund has not turned negative on manufacturing. Axis Mutual Fund continues to hold exposure to capital goods, power equipment, auto ancillaries, electronics manufacturing services and defence, supported by structural demand trends.
He noted that the transformer market remains supply constrained globally, benefiting Indian manufacturers.
"The long-term story continues, but because of the valuation, there may be corrections," he said, adding that any negative news could trigger sharp reactions in stocks that have delivered strong gains.
Devalkar said large-cap funds are currently better placed because they have higher exposure to banks, fast-moving consumer goods (FMCG) companies and other consumption-linked businesses, where valuations are more reasonable than many mid-cap and small-cap segments.
He pointed out that capital goods, hotels, hospitals and auto ancillary companies dominate mid-cap indices and continue to trade at demanding valuations, even as their business performance remains healthy.
"The risk-reward would remain good in the large cap," he said, adding that stronger earnings delivery over the next few quarters could further support the investment case.
Devalkar said investors should continue to focus on earnings and valuations rather than market narratives, noting that sectors tend to perform when improving fundamentals are accompanied by reasonable valuations.