More than 50% value and contra mutual funds outperform benchmarks. Should you invest? (2024)

Around 69% and 100% value and contra mutual funds have managed to outperform their respective benchmarks in the last three years, data crunching by ETMutualFunds showed.

There were 16 value oriented mutual funds that have completed three years of existence in the market. Out of these 16 value funds, 11 funds managed to beat their respective benchmarks. This indicated an outperformance percentage of 69% in the last three years.

Around three contra funds have completed three years of existence in the market and all three funds have managed to beat their respective benchmarks. In other words, contra funds had 100% of outperformance.


More than 50% value and contra mutual funds outperform benchmarks. Should you invest? (1)

    Also Read | Every 2 out of 3 mid and smallcap mutual funds fail to beat benchmarks. Should you still invest?

    Are you thinking about what helped investors earn good returns from these two categories?

    “The recent market rally has driven investors, especially those with higher risk tolerance, to seek opportunities in sectors that previously underperformed. For instance, the auto sector, which struggled earlier, has seen significant gains in the past year. This shift has led contra and value funds to outperform and surpass benchmark indices by substantial margins,” Abhishek Jain, Head of Research, Arihant Capital commented on the performance.

    “Value and contra mutual funds have delivered impressive returns over the past year, driven primarily by the market recovery from previous lows. Value funds, in particular, have benefited from their focus on sectors such as banking, financial services, and oil & gas, which have shown robust rebounds. The strategic stock selection within these sectors has led to strong performance as these undervalued stocks gained market recognition,” said Chakravarthy V., Cofounder and Director, Prime Wealth Finserv Pvt

    Chakravarthy added, “For contra funds, the contrarian strategy of investing in out-of-favor stocks has paid off significantly, with around 100% of these funds outperforming their respective benchmarks over the last three years. The overall economic recovery post-pandemic and improved business conditions have created a favorable environment for these funds. This is reflected in the impressive average return of 49.76% across value and contra-theme based mutual funds, with some schemes offering returns as high as 80%.”

    ICICI Pru Value Discovery Fund, the largest value fund based on assets managed, outperformed against its benchmark in the last three years. The fund offered 25.37% return in the last three years against 19.82% return by its benchmark (NIFTY 500 - TRI).

    HDFC Capital Builder Value Fund, the oldest value fund, delivered 22.65% return in the same time period. The scheme is benchmarked against NIFTY 500 - TRI which gave 19.82% in the same time period.

    SBI Contra Fund, the oldest and the largest contra fund, delivered 29.73% return in the last three years. The scheme is benchmarked against BSE 500 - TRI which gave 19.78% return in the same time period.

    Also Read | RIL, Infosys, and NTPC among top 10 stock holdings of HDFC Mutual Fund

    Kotak India EQ Contra Fund offered 24.91% in the same time period. The scheme is benchmarked against NIFTY 500 - TRI which offered 19.82% return in the said period.Invesco India Contra Fund gave 21.89% return against 19.78% by its benchmark (BSE 500 - TRI).

    Looking at the outperformance score, are you thinking of making an allocation in these funds at the current point of time? “We believe these funds will continue to perform well. However, after the recent rally, investors should exercise caution and consider investing in stages. Mutual funds remain a viable option for those with long-term investment objectives,” said Abhishek.

    “The current market conditions suggest a cautious approach for potential investors in value and contra mutual funds. While the past performance has been exceptional, leading to higher valuations, this might make the stocks less attractive for new investments. Investors should consider their long-term investment horizon, as these funds are best suited for those who can endure short-term volatility and commit to a longer-term strategy. Additionally, it is essential to maintain a diversified portfolio to spread risk and avoid over-reliance on a single category of funds. Diversification can help mitigate potential losses from sector-specific downturns or market-wide corrections. Therefore, while these funds have shown robust performance, careful consideration of current valuations, individual risk tolerance, and personal investment goals is crucial before making any new allocations,” said Chakravarthy.

    Value and contra funds are benchmarked against NIFTY 500 - TRI and BSE 500 - TRI which gave 19.82% and 19.78% returns respectively in the last three years.

    Value funds gave an average return of around 23.11% in the last three years.Contra funds gave an average return of 25.51% in the said time period.

    Should an investor make allocation in these funds? What is the outlook for contra and value funds?

    “We believe these two funds remain a good investment option. However, investors should take a pragmatic approach and adopt a longer-term investment horizon. These funds typically invest in sectors that are either currently underperforming or expected to perform better in the medium to long term, rather than in the near term,” suggests Jain.

    Also Read | These 9 equity mutual funds offer over 35% SIP return in both three and five years

    “The outlook for value and contra mutual funds remains cautiously optimistic. For value funds, the potential for sustained performance exists if the economic recovery continues and the sectors they are invested in maintain their growth trajectory. However, investors should be aware of inherent risks such as potential slowdowns in economic growth or adverse sector-specific developments that could impact performance. On the other hand, contra funds offer a compelling investment strategy by focusing on undervalued sectors or stocks that may be cyclically out of favor but have the potential for significant upside as market conditions change. The fact that nearly 100% of contra funds have outperformed their benchmarks over the past three years underscores the effectiveness of the contrarian approach. Nonetheless, investors should remain vigilant about market risks and maintain a diversified investment strategy to safeguard against potential volatility and ensure a balanced approach to achieving their financial goals,” said Chakravarthy.

    One should not make investment or redemption decisions based on the above exercise. One should always choose schemes based on risk appetite, investment horizon and goal.

    Value funds invest in stocks with reasonable valuations. Value investors buy such stocks and wait for the market to discover these stocks. When the discovery happens, the stock prices will go up, and value investors make money.

    During volatile phases these schemes fare better than schemes that stock up on expensive stocks. Value funds are recommended to only sophisticated investors with a long investment horizon.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times).

    If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on [email protected] alongwith your age, risk profile, and twitter handle.

    More than 50% value and contra mutual funds outperform benchmarks. Should you invest? (2024)
    Top Articles
    RentReporters | Report Rent Payments, Build Your Credit Score
    3PL Guide
    Kreme Delite Menu
    Asist Liberty
    Cintas Pay Bill
    80 For Brady Showtimes Near Marcus Point Cinema
    Blackstone Launchpad Ucf
    Dr Klabzuba Okc
    Routing Number 041203824
    Slag bij Plataeae tussen de Grieken en de Perzen
    Nier Automata Chapter Select Unlock
    Betonnen afdekplaten (schoorsteenplaten) ter voorkoming van lekkage schoorsteen. - HeBlad
    Kris Carolla Obituary
    Moviesda3.Com
    Shasta County Most Wanted 2022
    Sadie Proposal Ideas
    Loves Employee Pay Stub
    Bing Chilling Words Romanized
    Kountry Pumpkin 29
    Iu Spring Break 2024
    The EyeDoctors Optometrists, 1835 NW Topeka Blvd, Topeka, KS 66608, US - MapQuest
    John Chiv Words Worth
    Dtlr Duke St
    Ou Class Nav
    Mini Handy 2024: Die besten Mini Smartphones | Purdroid.de
    Gilchrist Verband - Lumedis - Ihre Schulterspezialisten
    Sorrento Gourmet Pizza Goshen Photos
    Garden Grove Classlink
    Generator Supercenter Heartland
    Insidious 5 Showtimes Near Cinemark Southland Center And Xd
    Otis Inmate Locator
    Transformers Movie Wiki
    Forager How-to Get Archaeology Items - Dino Egg, Anchor, Fossil, Frozen Relic, Frozen Squid, Kapala, Lava Eel, and More!
    Goodwill Houston Select Stores Photos
    What Time Is First Light Tomorrow Morning
    Powerspec G512
    Sc Pick 4 Evening Archives
    Empires And Puzzles Dark Chest
    Sabrina Scharf Net Worth
    Aita For Announcing My Pregnancy At My Sil Wedding
    Carteret County Busted Paper
    Tricare Dermatologists Near Me
    Coffee County Tag Office Douglas Ga
    Thothd Download
    Port Huron Newspaper
    2294141287
    Dicks Mear Me
    Rite Aid | Employee Benefits | Login / Register | Benefits Account Manager
    Race Deepwoken
    All Buttons In Blox Fruits
    Fresno Craglist
    Thrift Stores In Burlingame Ca
    Latest Posts
    Article information

    Author: Tyson Zemlak

    Last Updated:

    Views: 5394

    Rating: 4.2 / 5 (63 voted)

    Reviews: 94% of readers found this page helpful

    Author information

    Name: Tyson Zemlak

    Birthday: 1992-03-17

    Address: Apt. 662 96191 Quigley Dam, Kubview, MA 42013

    Phone: +441678032891

    Job: Community-Services Orchestrator

    Hobby: Coffee roasting, Calligraphy, Metalworking, Fashion, Vehicle restoration, Shopping, Photography

    Introduction: My name is Tyson Zemlak, I am a excited, light, sparkling, super, open, fair, magnificent person who loves writing and wants to share my knowledge and understanding with you.