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Invesco India Contra Fund: Fund review

Today, the Nifty 50 index is trading at price to earnings (P/E) multiple of 27 times. In such a situation, it is important to follow the tenet of value investing.

, ET Bureau|
Sep 10, 2019, 10.10 AM IST
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MF analysis
For the past five years, earnings growth has missed consensus estimates of analysts. Even this year, it seems the situation may not change much. A key factor which requires consideration is valuation of the broad benchmark indices. Today, the Nifty 50 index is trading at price to earnings (P/E) multiple of 27 times. This is still an 11 per cent premium to the valuation three years ago, and 28.7 per cent to the valuation five years ago. This shows that the Nifty P/E does not adequately reflect the climate of economic slowdown.

In such a situation, it is important to follow the tenet of value investing. Among schemes, which follow this approach and have performed well is Invesco India Contra Fund. In the past five-year and 10-year periods, the scheme has given 10.6 per cent and 13.3 per cent returns, respectively, while its peers in the category have given average returns of 7.6 per cent and 11.9 per cent over the same periods.

One of the factors which has helped maintain its performance even in the short term is clear focus of the scheme’s fund managers Amit Ganatra and Taher Badshah to stick to either sector leaders or the second best in an industry even in the mid cap category. This focus has paid off even in the highly bearish phase of markets. In the past six months, the fund managers have clearly enhanced focus on such stocks.

Portfolio change (Past 6 months)
New Entrants Complete Exits Increase in Allocation
Ambuja Cements ONGC CDSL
Ashok Leyland Parag Milk Foods Mphasis
Coal India Zee Entertainment Mahindra & Mahindra

Returns (in %)
Period CAGR Return SIP CARG Return Contra Fund -Average CAGR Return (%)
1 Year -9.24 -6.98 -7.24
3 Year 8.32 3.40 8.44
5 Year 10.61 8.38 9.73

Returns peer comparison (in %)
Scheme Name 1-Year 3-Year 5-Year
Kotak India EQ Contra Fund -5.24 8.56 8.85
L&T India Value Fund -11.92 4.85 10.09
Tata Equity PE Fund -10.99 6.49 10.02
Source: Accord Fintech, Complied by ETIG Database

Expert Take
Vishal Dhawan, CFP, Plan Ahead Wealth Advisors
Typically, we see very few schemes which follow value investing in true sense. The fund has been buying value stocks and holding them till the value plays out. The fund managers follow this rule carefully. They have no preference for market capitalisation. For investors looking to supplement their portfolio with a value or contra style, this scheme is a good choice.
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