Top 2 Performing Contra Mutual Funds with Nearly 50% Returns in the Last Year

Contra funds are equity mutual funds that follow a contrarian investment approach. This strategy involves investing in stocks that are currently out of favor or underperforming in the market but possess strong fundamentals and potential for long-term growth. The essence of this approach is to buy undervalued stocks at low prices and hold them until their value is realized when the market sentiment shifts.

According to regulatory guidelines, contra funds must adhere to a contrarian investment strategy, with a minimum of 65% of their total assets invested in equity and equity-related instruments. As per SEBI’s mutual fund categorization norms, an asset management company can offer either a Contra Fund or a Value Fund, but not both, due to the overlapping nature of their strategies. Contra investing is considered a subset of value investing, incorporating key valuation metrics such as the P/E ratio, P/B ratio, EBIT, EBITDA, cash flows, and profitability ratios like ROCE, ROE, and ROA.

Top Performing Contra Funds: Kotak India EQ Contra Fund and Invesco India Contra Fund

1. Kotak India EQ Contra Fund Direct-Growth

Kotak India EQ Contra Fund Direct-Growth is a contra mutual fund from Kotak Mahindra Mutual Fund. Launched on January 1, 2013, this fund has over 11 years of operational history and currently manages assets worth Rs 3,929 crores as of June 30, 2024. It is classified as a medium-sized fund within its category and has an expense ratio of 0.55%, aligning with the average cost structure of other contra funds.

Over the last year, Kotak India EQ Contra Fund Direct-Growth has delivered impressive returns of 49.99%. Since its inception, the fund has achieved average annual returns of 18.95%, effectively doubling investors’ money every three years. The fund primarily invests in sectors such as Financial, Energy, Technology, Healthcare, and Consumer Staples, with comparatively lower exposure to the Financial and Energy sectors than its peers. Its top five holdings include HDFC Bank Ltd., Infosys Ltd., ICICI Bank Ltd., Tech Mahindra Ltd., and Mphasis Ltd.

2. Invesco India Contra Fund Direct-Growth

Invesco India Contra Fund Direct-Growth, offered by Invesco Mutual Fund, shares a similar timeline with its inception date of January 1, 2013, and has an AUM of Rs 17,817 crores as of June 30, 2024. The fund charges an expense ratio of 0.51%, consistent with its category peers.

Invesco India Contra Fund Direct-Growth has delivered returns of 49.69% in the last year, with an impressive average annual return of 20.75% since its launch, doubling investments every three years. The fund has a diverse portfolio with major investments in the Financial, Healthcare, Services, Technology, and Automobile sectors, with relatively lower exposure to Financial and Healthcare sectors compared to other funds in the same category. Its top holdings include ICICI Bank Ltd., Infosys Ltd., HDFC Bank Ltd., NTPC Ltd., and Axis Bank Ltd.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.