Axis Mutual Fund bets big on India's service super-cycle

The fund house unveils a new fund that aims to grow with services sector boom

When historians look back at India’s post-pandemic growth spurt, they may reserve a special chapter for its services sector. Already contributing 55 per cent of GDP and employing two in every five Indians, services have quietly become the economy’s primary flywheel. From digital payments humming through roadside chai stalls to hospitals adding beds for a greying middle class, the breadth of opportunity is widening, and Axis Mutual Fund wants to bottle that momentum.

On 4 July, the asset manager will open the New Fund Offer for the Axis Services Opportunities Fund. This actively managed thematic scheme will invest at least 80 per cent of its corpus across 48 service-linked industries, from banking and IT to quick commerce and logistics. The window closes on 18 July, with a wallet-friendly minimum application of Rs 100.

Those tailwinds are visible in the data. Over the past decade, service companies have increased their profit share within the NSE-500 index to 53 per cent, surpassing industrial heavyweights, while return on equity metrics – aided by asset-light models – continue to trend higher than those of manufacturing peers. Yet valuations in several niches, particularly telecom and healthcare services, remain below pre-COVID peaks, offering what Axis calls “growth at a reasonable price.”

Portfolio managers Shreyash Devalkar, Sachin Relekar, and Krishnaa Narayan will run the fund with a bottom-up, quality-first ethos familiar to long-time Axis investors. Expect a “highly active share” basket tilted toward scalable franchises that marry capital efficiency with pricing power. Translation: private-sector lenders with widening fee streams, export-oriented IT outsourcers riding the Gen-AI capex wave, hospitals and diagnostics tapping India’s medical-tourism boom, and platform plays in e-commerce and fintech.

Crucially, the services theme also offers built-in diversification. Historical index data show a striking contra-relationship between banking and IT returns – one sector often rallies when the other cools – helping dampen volatility without blunting upside. Overlay policy boosters such as the Reserve Bank’s credit-growth push, the Centre’s tourism infrastructure blitz, and Ayushman Bharat’s expanding insurance net, and the macro case strengthens further.

Sceptics will raise the usual red flags: service earnings can be hostage to global demand cycles, regulatory shocks (think telecom tariffs) and skill-shortage inflation. Axis counters that an actively managed framework – rather than a market-cap-weighted ETF – lets the team pivot across 200-plus listed service names and prune riskier corners when the cycle turns.

For investors who already hold broad-market funds, the scheme offers a targeted satellite allocation to what may be India’s most structural growth trend for the next two decades. The recommended horizon is five years or more, and early redemptions within 12 months attract a modest 1 per cent exit load (waived on the first 10 per cent of units).

India’s service economy has long been the backstage crew keeping growth on script. With the Axis Services Opportunities Fund, it’s stepping into the spotlight – inviting investors to claim a share of the applause while the show is still in its opening act.

Also read: Why is Axis MF improving its performance? Its CIO explains