In a nutshell
Sivakumar says Axis MF saw the first signs of stress in corporate balance sheets in 2012-13 itself (though it started impacting portfolios only in recent months), which prompted them to adopt a very cautious approach towards corporate credit since then.
While overall credit environment is improving, heavily indebted companies are seeing increased pressure, leading to higher credit rating downgrades within this group.
Meanwhile, more investor money flowing into high accrual funds in the quest of higher yields meant that portfolio risk (in terms of credit risk or risk of downgrades) actually increased in the industry in the accrual / high accrual funds segment
Axis MF has stayed away from the high accrual fund segment, and has preferred to maintain its conservative stance on credit quality, with strict internal discipline on portfolio construction.
While early signs of economic recovery are visible, it is as yet localized in the consumer space and has not really spread meaningfully to the industrials and commodities spaces. As such, Axis MF continues to maintain a cautious stance, with a clear preference for high quality, liquid credits.