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Value Funds

Value funds invest in companies across sectors where companies currently have lower valuations but exhibit significant growth potential ahead.

time horizon

Long Horizon

total funds

26 Funds

total aum

₹1,32,653 Cr Total AUM

Equity

Explore Value Mutual Funds

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Fund nameFund sizeExpense Ratio
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JM Value Fund Direct Growth
JM Value Fund Direct Growth

Value Very High Risk

₹1,499 Cr0.9%26.7%
HSBC Value Fund Direct Growth
HSBC Value Fund Direct Growth

Value Very High Risk

₹14,123 Cr0.77%24.0%
ICICI Prudential Value Discovery Fund Direct Growth₹51,197 Cr0.99%23.3%
Canara Robeco Value Fund Direct Growth₹1,342 Cr0.59%22.9%
Nippon India Value Fund Direct Growth₹8,961 Cr1.14%22.8%
Axis Value Fund Direct Growth
Axis Value Fund Direct Growth

Value Very High Risk

₹749 Cr0.96%22.7%
Templeton India Value Fund Direct Growth₹2,304 Cr0.84%22.6%
Tata Equity P/E Fund Direct Growth₹9,173 Cr0.8%22.4%
Aditya Birla Sun Life Pure Value Fund Direct Growth₹6,779 Cr1%21.5%
Bandhan Sterling Value Fund Direct Growth₹10,600 Cr0.67%21.3%

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All about Value Funds

What are Value Funds?

The Securities and Exchange Board of India (SEBI) defines value mutual funds as funds that follow a Value investment strategy, with at least 65% in equity and equity-related instruments.

At its core, a value fund is a type of mutual fund that primarily invests in stocks believed to be undervalued by the market.

These funds try and find investment opportunities that other funds usually dismiss or overlook.

Their main aim is to identify stocks trading below their intrinsic value and potentially benefit from their future growth.

What is Value Investing?

Value investing is an investment strategy pioneered by Benjamin Graham, known as the father of value investing. He believed that market prices of stocks often fluctuated irrationally and did not necessarily reflect their underlying intrinsic value. 

The concept of value investing is based on the belief that the market occasionally misprices stocks, not recognising their true potential. This allows intelligent investors to buy undervalued stocks and profit from their future appreciation.

The basis of value investing lies in calculating a stock's intrinsic value, which is its estimated true worth based on its earnings, assets, cash flow, and growth potential. 

Value investors analyse financial statements, company performance, industry trends, and other relevant factors to estimate the intrinsic value of a stock.

Did you know: As of 2023, India has more than 10 value funds that made investors double-digit returns

Advantages of Investing in Value Funds

  1. Potential for Higher Returns: Value funds can deliver good returns when the price of undervalued stocks in their portfolio increases as the market recognises their true worth.
  2. Safety Margin: By investing in undervalued stocks, value funds provide a safety margin, reducing the downside risk if the stock price temporarily falls. When the stocks are undervalued, the chances of it going down further are not that high.
  3. Capitalising on Missed Opportunities: Value funds excel at identifying overlooked or undervalued stocks. If the fund manager chooses the right stocks and they perform well, the potential for growth is very high

Disadvantages of Investing in Value Funds

  1. Long Investment Horizon: Value investing requires more patience in comparison to growth investing. It may take time for undervalued stocks to realise their true worth and deliver favourable returns, and that might not be ideal for short-term investors who are looking to grow their money quickly.
  2. Value Traps: Not every bet the fund manager makes may work. There is a risk of falling into value traps, where stocks continue to underperform despite appearing undervalued, leading to potential losses for investors.
  3. Underperformance during Low-Interest Rates: Value funds may face challenges during periods of low-interest rates. During such phases, growth-oriented stocks tend to outperform. This can potentially impact the short-term performance of value mutual funds.

Are You a Value Investor or a Growth Investor?

Value investing is not the only approach fund managers take to select stocks. Growth investing is another method that invests in the growth potential of stocks.

Determining your investment style is crucial to aligning your investment objectives with the right strategy. 

Are you a value investor or a growth investor? Compare the parameters in the table below to understand your investing style better.

 Value InvestingGrowth Investing
Investment PhilosophyFocuses on finding undervalued stocks whose intrinsic value is not recognised and has potential future growthFocuses on investing in companies with high growth potential, even if their current valuation may seem high.
Investment ObjectiveValue investors aim to generate long-term capital appreciation by investing in undervalued stocks that have the potential to appreciate over time.Growth investors aim to maximise capital appreciation by investing in companies with significant growth prospects that can give them good returns
Time HorizonValue investing typically suits investors with a longer investment horizon Growth investing may appeal to investors with a shorter time horizon as stocks are already in the growth phase
Risk appetiteValue investors need to have the willingness to withstand short-term market volatility.Growth investors need a high-risk appetite to get rapid capital appreciation. 

Conclusion

Value investing takes a unique approach to investing that can benefit investors willing to capitalise on stocks that are mispriced in the market.

But an important point to remember is that while historical data shows that many value funds have delivered double-digit returns over a 10-year horizon, past performance does not guarantee future results.

Investing in value mutual funds involves risks, and it is essential to conduct thorough research, analyse the fund's and fund manager’s track record, and assess your risk tolerance before making any investment decisions.

By understanding the principles and drawbacks of value mutual funds, you can make informed investment choices that align with your financial goals. 

Note- As an investor, it is crucial to align your investment philosophy and risk appetite with the objectives of the fund. Furthermore, it is advisable to consult with a financial advisor who can provide personalised guidance tailored to your specific financial goals and circumstances.

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We compared 2 index funds with different investment strategies.

Since its inception on 4th February 2021 to now (26th May 2023), the Nippon India Nifty 50 Value 20 Index Fund, which follows the value investing strategy, has given 36.7% returns.

On the other hand, the UTI Nifty 50 Index Fund gave 27% returns in the same time frame.

Although funds' returns depend on market conditions, this comparison clearly shows that value strategy can work in the Indian stock market and has given investors better returns than a simple index fund.

Value funds are equity-oriented funds and are hence taxed in the same manner. If you hold your investments for more than one year, and gains are over Rs. 1 lakh, then you are taxed at 10%. If you hold it for less than one year, you will be taxed at a flat rate of 15%

The choice between value investing and growth investing depends on your-risk appetite, Time horizon, and Investment goals. If you prefer a more conservative approach and are willing to wait for the market to recognise the value of a stock, value investing matches your investment style. On the other hand, if you are comfortable with higher risk, you can choose growth investing.

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Disclaimers: Data can be sourced from Morningstar, Bloomberg, CRISIL, etc. Information gathered and provided herein is believed to be from reliable sources.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Mutual Fund distribution services are offered through Dezerv Distribution Services Private Limited, a wholly owned subsidiary of Dezerv Investments Private Limited (collectively referred to as “Dezerv”) with AMFI Registration No.: ARN- 248439.Read More