A boundary-fitted moving mesh scheme is presented for the simulation of two-phase flow in two-dimensional and axisymmetric geometries. The incompressible Navier-Stokes equations are solved using the finite element method, and the mini element is used to satisfy the inf-sup condition. The interface between the phases is represented explicitly by an interface adapted mesh, thus allowing a sharp transition of the fluid properties. Surface tension is modelled as a volume force and is discretized in a consistent manner, thus allowing to obtain exact equilibrium (up to rounding errors) with the pressure gradient. This is demonstrated for a spherical droplet moving in a constant flow field. The curvature of the interface, required for the surface tension term, is efficiently computed with simple but very accurate geometric formulas. An adaptive moving mesh technique, where smoothing mesh velocities and remeshing are used to preserve the mesh quality, is developed and presented. Mesh refinement strategies, allowing tailoring of the refinement of the computational mesh, are also discussed. Accuracy and robustness of the present method are demonstrated on several validation test cases. The method is developed with the prospect of being applied to microfluidic flows and the simulation of microchannel evaporators used for electronics cooling. Therefore, the simulation results for the flow of a bubble in a microchannel are presented and compared to experimental data.