Axis Services Opportunities Fund: Investing in the growth engine of Indian economy

About Services Sector in India

In modern times, services sector many aspects of our day to day life. From mobile / broadband to online shopping (e-commerce), credit cards and net banking, quick commerce, travel and leisure, healthcare services to media (TV, OTT) and entertainment, it is difficult to imagine modern life without the roles of the services sector. Services sector is the largest contributor to India's GDP. Services is a major (source: Press note on provisional FY 2023-24 GDP estimate, Ministry of Statistics & Programme Implementation, Government of India). India is one of the Top 10 services exporter in the world. The services sector covers a variety of industries ranging from Services as investment theme represents a vast and diversified set of investment opportunities covering sectors like Banking and Financial Services, Information Technology, Telecom, Healthcare, Transportation, Hospitality etc. Axis MF has launched a new fund offer (NFO), Axis Services Opportunities Fund, which will invest in companies that are part of the services theme. The NFO has opened for subscription on 4^th July and will close on 18^th July 2025. In this article we will know about the Axis Services Opportunities fund NFO

Government reforms and initiatives for the Services Sector

To ensure the liberalisation of investment in various industries, the Government has permitted 100 per cent foreign participation in telecommunication services including all services and infrastructure providers, through the Automatic Route. The FDI ceiling in insurance companies was also raised from 49% to 74%. Measures undertaken by the Government to boost FDI include the National Single-Window system, enhancement in the FDI ceiling through the automatic route etc. have played a significant role in facilitating investment. The Government's push to boost the digital economy, growing internet penetration, rise in smartphone adoption, financial inclusion through PM Jan Dhan Yojana, increased adoption of digital payments (UPI and JAM Trinity), shift from physical assets to financial assets, RBI's push for credit, growth in demat accounts, growth in mutual fund AUM, etc indicates growing financialization. At the same time, healthcare reforms and initiatives like Ayushman Bharat Pradhan Mantri - Jan Arogya Yojana (public health insurance scheme), ABHA Health card, e-Sanjeevani (telemedicine) etc are key steps in providing universal healthcare to vast sections of the population. Formalization of the economy (shift from unorganized to organized sectors) through reforms like GST implementation, digital India (UPI), e-invoicing can create a long runway for growth of services sector in India.

Why should you invest in the Services Sector?

• Services sector has remained the engine of India's growth: The services sector in India has grown by 11% in the last 10 years (as of FY24) vs overall GVA growth of 10.2%. An increase in service GVA to Rs. 165 lakh Crore is expected in FY25 from the Rs 60 Lakh Crore in FY15. The chart below shows the Service sector contribution to GVA compared to other sectors in various years.
  
  

  

  Source: MOFSL Institution Research, data as on April 2025



• Long Term Wealth Creation with Services sector investment: The chart below shows how the Nifty Services Sector has grown over the last one and a half decade since 2010.
  
  

  

  Source: ACEMF, Axis MF Internal Analysis, Data As on 30^th April 2025. Disclaimer: Past performance may or may not be sustained in the future



• Share of services increase with per capita income: A world bank data reveals that the services sector growth aligns with Per Capita income crossing the inflection point of $2000. (See graphic below). Investing in the Services sector gives an opportunity for investors to participate in this growth.
  
  

  

  Source: Word Bank, data as on May 2025, data last available for 2023



• Diversified thematic investment: Investment in the Services sector helps investors diversify their portfolio with benefits from growth across different sectors. (See graphics which show a summary of the number of stocks across the services sector with their relative percentage, and their growth potential)
  
  

  

  Source: Axis MF



• Lower overlap amongst complimentary themes: The Services sector has a low overlap of stocks with other themes like manufacturing and consumption. This broad-based exposure helps in further diversification sans the probable overlap in investor portfolio.
  
  

  

  Source: Axis MF

Growth trends in various services

Financial Services: The financial sector has grown exponentially in the last decade driven by digitization and fintech boom.

• Bank Profitability growth from Rs. 109bn in FY20 to Rs. 3496 bn in FY24


• AUM of Life insurance increased by 12% in last 10 years (FY15-25E)


• Unique MF investors jumped 2.4x (50m) in last 5 years


• Major NBFC loan AUM growth by 17% in last 5 years


• Credit card spends grew by 20% in last two years (Jan 23-25)


• Demat accounts surged 4.4x (179m) in last 5 years

IT Services: IT services provides one of the best cash conversions within the different sectors despite the various challenges.

• India stands to gain from outsourcing with digitally skilled talent at lower costs


• Outsourcing penetrations is expected to grow to an estimated 34% by 2029, which should support the growth for IT companies. Technology is emerging as a competitive differentiator, so IT services firms can combine expertise with cost-effectiveness.


• Indian IT firms have demonstrated ability to pivot their services offerings and reskill and upskill talent which positions them well for tapping into any new technology trends.

Telecom: The telecom sector has seen an increasing base with 5G driving increased data usage.

• The ARPU or Average Revenue Per User is amongst the lowest for India globally.


• The ARPU is however increasing as all the operators are increasing tariffs (See graph below)
  
  

  

  Source: Axis MF, CLSA, India ARPU taken from TRAI “Performance indicator reports 2023-24

Healthcare: Growth drivers point to high opportunity in healthcare sector. Medical tourism is a growing sector and is estimated to quadruple by the year 2030 (see graph below). Despite impressive strides made by India in healthcare infrastructure and services, our healthcare expenditure as percentage of GDP is low compared to global peers, indicating a long runway for growth in healthcare sector.

Source: Axis MF Worldostats, World Health Organization, Bureau of Immigration (BOI)

Hospitality: Hospitality continues to get a higher wallet share

• Domestic Tourism is expected to grow at CAGR of 14.2%


• A sharp growth in spiritual tourism is witnessed in India, and is expected to reach $130 billion by the year 2032

Axis Services Opportunities Fund NFO

The Axis Services Opportunities Fund is a thematic fund designed to allocate actively to companies using a bottom- up approach focussing on scalability opportunities in services sector. The fund will invest across market capitalization, follow a quality focussed style and maintain high active share. The benchmark for the fund is Nifty Services Sector TRI. The fund is managed by Fund Managers Mr. Sachin Relekar, Mr. Shreyash Devalka, and Ms. Krishnaa Narayan (for foreign securities). The fund will open its subscription on 4^th of July 2025.

Investment Philosophy

Source: Axis MF Product leaflet

Why should you invest in Axis Services Opportunities Fund?

• Service industries benefits from economic formalization and technology growth, driven by rising incomes and digitalization.


• Services theme covers diverse sectors ranging from traditional sectors like Banking, IT, Telecom, Power etc to emerging sectors like Q-Commerce, logistics, E-Commerce and Fintech


• The fund will invest quality companies with scalable opportunities, capital efficiency, and competitive advantages.


• Fund will have high active share, focusing on trends in formalization and technology within the services theme, thereby aiming to generate alpha for investors

Why invest in the fund now?

1. Improved Profitability: Services Sectors profit contribution has increased in NSE 500 Index pool


2. Expected PAT to also increase: 2 of the Top 3 sector of PAT growth are services


3. Higher earnings: It is not just profitability but also higher earnings that will drive services


4. Better placed valuation: Service Sector valuation over 2019 is lower compared to non-services

Who should invest in the fund?

The fund is suitable for

• Investors with high-risk appetite


• Investors who are looking for long term capital appreciation


• Investors with a minimum investment horizon of 5+ years


• Those who want to participate in the growth of service industry in India.

Contact your financial advisor or mutual fund distributor to understand if the Axis Services Opportunities fund is suitable for your investment needs.