Best Contra Mutual Funds

The below table shows a list Of the Best Contra Mutual Funds Based on AUM, NAV, and minimum SIP.

Introduction to Contra Mutual Funds In India

SBI Contra Fund

SBI Contra Direct Plan-Growth is a Contra mutual fund scheme from SBI Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

SBI Contra Direct Plan-Growth as a Contra Mutual fund, manages assets valued at ₹34,366.43 crores. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 33.76%. This fund has an exit load of 1% and an expense ratio of 0.59%. According to SEBI, it falls under the Very High-risk category. The fund’s asset allocation comprises Equity at  89.64%, Debt at 5.76% and Other at 4.59%.

Invesco India Contra Fund

Invesco India Contra Fund Direct-Growth is a Contra mutual fund scheme from Invesco Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

Invesco India Contra Fund Direct-Growth as a Contra Mutual fund, manages assets valued at ₹17,268.79 crores. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 26.55%. This fund has an exit load of 1% and an expense ratio of 0.51%. According to SEBI, it falls under the Very High-risk category. The fund’s asset allocation comprises Equity at  99.15%, No Debt and Other at 0.85%.

Kotak India EQ Contra Fund

Kotak India EQ Contra Fund Direct-Growth is a Contra mutual fund scheme from Kotak Mahindra Mutual Fund. This fund has been in existence for 11 years and 8 months, having been launched on 01/01/2013.

Kotak India EQ Contra Fund Direct-Growth as a Contra Mutual fund, manages assets valued at ₹3,499.74 crores. Over the past 5 years, it has achieved a Compound Annual Growth Rate (CAGR) of 26.11%. This fund has an exit load of 1% and an expense ratio of 0.56%. According to SEBI, it falls under the Very High-risk category. The fund’s asset allocation comprises Equity at  98.35%, No Debt and Other at 1.65%.

Contra Mutual Funds Meaning

Contra mutual funds are investment funds that employ a contrarian strategy. This means they invest in assets that are currently out of favour or undervalued, expecting that these will eventually perform better than the market’s prevailing trends.

These funds are managed by professionals who seek opportunities in sectors or stocks that are overlooked by the broader market. They bet against the prevailing market sentiment, aiming for higher returns when these undervalued assets gain recognition and value.

Investors in contra mutual funds should be prepared for higher volatility, as these funds often take positions contrary to market trends. This strategy requires patience, as the turnaround may take time, but it offers the potential for significant long-term gains.

Features of the Best Contra Mutual Funds India

The main features of the best contra mutual funds in India include a focus on undervalued stocks, experienced fund managers, a long-term investment horizon and robust research processes.

• Focus on Undervalued Stocks: These funds invest in stocks that are currently undervalued or out of favour, anticipating that their prices will rise as market perceptions change.
• Experienced Fund Managers: They are managed by seasoned professionals who have a proven track record of identifying and capitalizing on market mispricings, using a contrarian approach.
• Long-Term Investment Horizon: Contra funds typically require a long-term investment period to realize their potential, as the market correction and subsequent gains may take time to materialize.
• Robust Research Processes: The best funds employ comprehensive research and analysis to identify undervalued stocks, relying on detailed financial evaluations and market trends to make informed investment decisions.

Top Contra Mutual Funds Based on Expense Ratio

The table below shows the Best-performing Contra Mutual Funds Based on the highest to lowest expense ratio.

Best Contra Mutual Funds Based on 3Y CAGR

The table below shows the Best Contra Mutual Funds Based on the Highest 3Y CAGR.

List Of Contra Mutual Funds Based on Exit Load

The table below shows Best Performing Contra Mutual Funds In India Based on Exit Load, i.e., the fee that the AMC charges investors when they exit or redeem their fund units.

Contra Mutual Funds Returns

The table below shows Contra Mutual Funds Returns Based on 1Y return

Historical Performance of Contra Funds

The table below shows the Historical Performance Of Contra Mutual Funds based on 5Y return

Factors to Consider When Investing in Contra Mutual Funds

The main factors to consider when investing in contra mutual funds include understanding the fund’s strategy, evaluating the track record of fund managers, assessing the fund’s risk profile and being prepared for long-term investment horizons.

• Understanding the Fund’s Strategy: Ensure you grasp the contra strategy used by the fund, which involves investing in undervalued or out-of-favour stocks and how it aligns with your investment goals.
• Evaluating the Track Record of Fund Managers: Review the experience and historical performance of the fund managers to gauge their ability to effectively implement a contrarian approach and deliver returns.
• Assessing the Fund’s Risk Profile: Consider the inherent volatility and risks associated with contra-mutual funds, as they may experience higher fluctuations due to their investment in underperforming stocks.
• Being Prepared for Long-Term Investment Horizons: Contra funds often require patience, as it may take time for the undervalued stocks to recover and realize their potential, so align your investment timeline accordingly.

How to Invest in Top Contra Funds?

To invest in top contra funds, start by researching various funds that follow a contrarian strategy. Look for funds with a solid track record, experienced managers and a clear investment philosophy that aligns with your financial goals.

Next, evaluate the fund’s performance metrics and risk profile. Compare historical returns, volatility and how well the fund has managed downturns. This will help you choose a fund that matches your risk tolerance and investment horizon.

Finally, complete the investment by opening an account with Alice Blue. Ensure you understand the fund’s fees, minimum investment requirements and the process for monitoring and managing your investment.

Impact of Market Trends on Top Contra Mutual Funds

Market trends significantly impact top contra mutual funds by influencing their performance. When the market is bullish, contra funds may underperform as they invest in undervalued stocks that are not in favour. Conversely, in a bearish market, these funds can outperform as their investments become more attractive when market sentiment turns negative.

Fund managers rely on market corrections to realize gains from their contrarian bets. Thus, while market trends can introduce volatility, they also present opportunities for contra funds to capitalize on undervalued assets as market perceptions shift.

How Contra Funds Perform in Volatile Markets?

In volatile markets, contra funds often experience higher fluctuations due to their focus on undervalued or out-of-favour stocks. These investments can see sharp price movements as market sentiment shifts, causing increased volatility in the fund’s performance.

However, contra funds can also benefit from volatility by identifying and capitalizing on mispriced assets. As market corrections occur, these undervalued stocks may offer significant upside potential, potentially leading to strong returns once stability returns.

Advantages of Investing in Contra Mutual Funds

The main advantages of investing in contra mutual funds include the potential for high returns by capitalizing on undervalued stocks, diversification benefits, a contrarian approach that can outperform in market downturns, and the expertise of experienced fund managers.

• Potential for High Returns: Contra funds invest in undervalued stocks expected to appreciate significantly, offering the potential for substantial long-term gains when market perceptions shift.
• Diversification Benefits: These funds typically invest in a range of out-of-favour sectors or stocks, providing diversification that can reduce risk compared to investing in trending assets alone.
• Outperforming in Market Downturns: The contrarian strategy can be advantageous during market downturns, as undervalued stocks may become more attractive and perform better when market sentiment improves.
• Expertise of Experienced Fund Managers: Contra funds are managed by professionals skilled in identifying and exploiting market inefficiencies, leveraging their expertise to enhance returns and manage risks effectively.

Risks of Investing in Contra Mutual Funds

The main risks of investing in contra mutual funds include higher volatility, the potential for prolonged underperformance, reliance on market timing, and the possibility of poor stock selection by fund managers.

• Higher Volatility: Contra funds invest in undervalued stocks that may experience significant price swings, leading to higher volatility compared to more stable investments.
• Potential for Prolonged Underperformance: These funds may underperform during market upswings as they focus on out-of-favour stocks, resulting in periods of disappointing returns while waiting for market corrections.
• Reliance on Market Timing: The success of contra funds depends on accurately timing market reversals, which can be challenging and may lead to missed opportunities or losses if market conditions do not align with the fund’s strategy.
• Possibility of Poor Stock Selection: The contrarian approach requires precise stock picking; if fund managers misjudge the potential of undervalued stocks, it can lead to poor investment outcomes and reduced returns.

Contribution of Contra Funds to Portfolio Diversification

Contra funds contribute to portfolio diversification by investing in undervalued or out-of-favour stocks, which often differ from mainstream market trends. This approach helps spread investment risk across various sectors and stocks that might not be correlated with broader market movements.

Including contra funds in a portfolio can enhance diversification benefits, particularly during market corrections or downturns. Their focus on mispriced assets can offer unique opportunities for growth that are not typically available through conventional investments, potentially balancing overall portfolio performance.

Who Should Invest in Contra Funds?

Investors who have a high-risk tolerance and are comfortable with market volatility should consider contra funds. These investors are typically patient, willing to hold investments for the long term, and are interested in capitalizing on undervalued assets.

Additionally, those who seek diversification beyond traditional investment strategies and are confident in the expertise of fund managers may benefit from contra funds. This approach suits investors looking for potentially high returns from out-of-favour stocks during market corrections.

Impact of Fund Manager Expertise on Contra Mutual Funds Performance

Fund manager expertise significantly impacts contra mutual funds’ performance by influencing their ability to identify and capitalize on undervalued stocks. Skilled managers use extensive research and market insights to select assets poised for recovery, enhancing potential returns.

Experienced fund managers also navigate market volatility more effectively, adjusting strategies as needed. Their proficiency in timing market reversals and managing risks can lead to better performance and more consistent long-term results for contra-mutual funds.

Contra Fund vs Value Fund

The main difference between a contra fund and a value fund lies in their investment strategies. Contra funds focus on stocks currently out of favour but expected to rebound, while value funds seek undervalued stocks based on intrinsic value.

• Investment Focus: Contra funds invest in out-of-favour stocks that are expected to recover, whereas value funds target stocks undervalued relative to their intrinsic worth based on financial metrics.
• Market Timing: Contra funds often rely on market timing to capitalize on trends, whereas value funds are less dependent on market timing, focusing on long-term value regardless of short-term market conditions.
• Volatility: Contra funds can be more volatile due to their focus on underperforming stocks, while value funds typically invest in established companies with stable financials, leading to potentially lower volatility.
• Investment Horizon: Contra funds may require a longer time horizon to realize gains from market corrections, whereas value funds seek to capture value over the long term based on fundamental analysis and intrinsic value.

FAQs – List Of Contra Mutual Funds

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Disclaimer: The above article is written for educational purposes, and the companies’ data mentioned in the article may change with respect to time. The securities quoted are exemplary and are not recommendatory.