Invest in India's Service Sector with Axis Mutual Fund's latest NFO

Axis Mutual Fund’s New Fund Offer (NFO), the Axis Services Opportunities Fund (An open-ended equity scheme following services theme) is kicking off. This new fund is designed to offer investors a strategic entry point into India's rapidly expanding services sector, the engine that is driving our nation forward.

Here are the key details you'll want to know about this exciting new fund:

Fund brief: A thematic fund, focusing specifically on the dynamic services sector.
Guiding Hands: The fund will be managed by our experienced fund managers Mr. Sachin Relekar, Mr. Shreyash Devalkar, and Ms. Krishnaa Narayan (for foreign securities).
Looking Ahead: Designed for a typical investment horizon of 5 years or more.

Why this fund, why now?
It's about India's next big story. We'll show you why this isn't just a trend, but a powerful long-term opportunity for your investments.

India's Services Sector: The Powerhouse Driving Our Nation Forward

Services are everywhere. They are the invisible force in our lives and economy. From your daily mobile banking to your favourite streaming service, and from online shopping to healthcare consultations, services have become an integral part of our lives. They deliver value through experiences and actions, not just physical goods.

And it isn't just about convenience. The services sector is the backbone of India's economy, making up about 55% of its total size in FY24. It's projected to contribute 60% of India’s GDP by 2047, playing a pivotal role in economic expansion. This sector has been a consistent high-flyer, growing by 11% over the last 10 years (as of FY24) compared to the overall GVA growth of 10.2%. We even expect the service GVA to jump from Rs 60 Lakh Crore in FY15 to Rs. 165 lakh Crore in FY25.

Source: MOFSL Institution Research, data as in April 2025.

Healthy Growth and Strong Profits: A Winning Combination

The services sector boasts strong fundamentals. For FY24, services saw a robust revenue growth of 33.7%, compared to 10.3% for Nifty 500. While operating margins for services were 7.0% in FY24, compared to 10.2% for Nifty 500, its Return on Equity (ROE) stood at 19.5% in FY24, higher than Nifty 500's 19.1%.

Banks demonstrated a strong 31% PAT growth in FY24.

Source: Bloomberg and Internal research, data as on 30thApril 2025

India's Global Edge: Services Leading Our Exports

When we talk about India's export success, services are a huge part of the story, making up 44% of our total exports. Since December 2020, service exports have almost doubled, outpacing the 41% rise in goods exports. This highlights the strength of India's export story. India has continued to gain services export market share.

Source: NSE, IBEF, Kotak Institution, Morgan Stanley research and Internal research.

A Job Creation Machine: Impacting the Real Economy

The services sector isn't just about big numbers; it's about people. It employs a substantial 41% of India's workforce while contributing a remarkable 55% to the Gross Value Added (GVA). In comparison, agriculture, despite employing a third of the workforce, contributes only 18% to GVA.

Looking ahead, a 22% increase in overall employment is expected by 2028, with the services sector leading the surge in job creation. Specifically, retail trade has seen a 66.7% growth in employment, financial services 49.1%, and IT & ITES 48.1% since FY17.

Source: PIB, CMIE, Elara Capital. GVA-Gross Value Added

A Wide Open Field: Diverse Opportunities & Resilience

The services sector offers a vast and varied investment landscape, providing a broader and complementary theme with lower overlap compared to traditional sectors.

We've seen the number of services stocks in the NSE 500 grow from 177 in May 2015 to 197 in April 2025, with their market exposure also increasing from 28% to 53%. Historically, during uncertain times, the services sector has proven to be resilient. For instance, in 14 of the last 25 years, banking and IT have seen contra performance, with one sector generating exponential returns or protecting the downside during volatile periods.

Source: MOFSL Institution Research, data as in April 2025. NSE and Internal research, data as on 20thMay 2025. For IT sector Nifty IT index is considered and for Bank Nifty Bank Index is considered.

Global Factors may not impact India Significantly

The ongoing tariff tensions have created significant uncertainty in global markets. Indian economy is primarily domestic driven, with exports constituting a small portion of GDP, making it less susceptible to global trade disruptions.

So far, services have not been subject to tariff tantrum. One segment that may experience some impact is the IT sector, primarily due to project delays amid prevailing uncertainty. However, we believe this uncertainty may persist and eventually be treated as the new normal by businesses. Given India’s competitive advantage in IT services, the overall impact on the sector is expected to be limited.

Policy Makers Pushing for Growth

Credit growth has slowed from March 2024, with moderation across segments. However, policy maker actions like liquidity infusion, monetary easing, and reversal of changes in risk weightages are expected to push credit growth. An improved credit growth has a direct impact on lenders, supporting the financial services sector.

Moreover, the services sector's valuations have normalized and are now closer to their 10-year average, presenting an opportune entry point.

The Axis Services Opportunities Fund: How We Plan to Invest for You

Our Axis Services Opportunities Fund is built on a clear investment philosophy to navigate and capitalize on this exciting landscape.

Flexible market cap approach: We won't be limited by company size, allowing us to invest in a wide range of opportunities across market caps within the services sector.

Active Management: Our fund managers will be actively picking stocks, aiming for a high 'active share' to deliver strong returns.

Bottom-Up Focus: We'll be looking at individual companies from the ground up, seeking out those with truly scalable opportunities.

Quality First: Our style is focused on quality, identifying businesses with strong competitive advantages, robust growth rates, scalable operations, and efficient use of capital.

Our Strategy: Tapping into India's Transformation

The Axis Services Opportunities Fund will specifically aim to identify companies that are capturing growth driven by two key trends: formalization and technology adoption. This means looking at areas like e-commerce and quick commerce in retail, the evolving hospitality and healthcare sectors, the rise of online banking, and the increasing online sale of insurance.

Given all the exciting details about India's services sector, now truly feels like the perfect moment to consider investing. The Axis Services Opportunities Fund can offer you a straightforward way to be a part of this incredible growth story. It's an opportune time to align your investments with India's promising economic journey and tap into its bright future.

Disclaimers:

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. 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 a 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. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.

The sector mentioned herein are for general assesment purpose only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. Past performance may or may not be sustained in future.

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 Ltd. is not liable or responsible for any loss or shortfall resulting from the operation of the scheme

Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully.