“Value by definition indicates investing in stocks and sectors that are not being looked favourably by the
This definition doesn’t have a time-frame. The value can be realised in six months or three years, so investors need to be ready for periods when such funds will underperform for a long time,” said Amol Joshi, founder of Plan Rupee Investment Services.
“The recent spurt in performance should not be the sole criterion to buy into such funds. Given the volatility expected in the category, an investor should hold a long investment horizon of at least seven years," said Vidya Bala, co-founder of primeinvestor.in
At the end of June, value and contra funds managed Rs 48,764 crore of investor assets. The category is still relatively small as it accounts for 6.8 per cent of assets managed by equity-oriented schemes.
Experts point out that there can be times when such funds are unable to contain downside, unless the fund manager exits holdings in which valuations have seen a sharp run-up.
“Following a steep rally, some of the stocks move into the growth territory and when the markets
correct, some of these holdings can come under pressure,” Bala said.
Advisors say investors should look at value funds, but as part of their overall diversification strategy. “Just like investors should make asset allocation between equity and debt, investors should consider a blend of growth and value strategies within their equity basket,” Joshi said.
“One cannot be overweight on any single style, as one doesn’t know when stock rotation or sector rotation will take place,” he added.
In 2019, value funds ended with gains of 2.39 per cent, performing more or less in-line with mid-cap funds and better than small-cap funds, which ended in the negative territory.
However, the category performance was below that of large-cap funds that saw gains of over ten per cent.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.