Best Contra Mutual Funds

As the name suggests, these funds take a contrarian view on equities.

The fund manager picks underperforming stocks or sectors, which are likely to perform well in the long run, at cheap valuations.

Mutual funds under new SEBI circular will be permitted to offer either Value fund or Contra fund.

Top 10 Contra Mutual Funds

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Invesco India Contra FundEquityModerately High2.9%4star919
Kotak Classic ContraEquityModerately High3.9%3star140
SBI Contra FundEquityModerately High-9.7%2star1,488
View All Top 10 Contra Mutual Funds

Let's have a closer look

Now let us jump and check about these top 10 mutual fund schemes.

Invesco India Contra Fund - Direct - Growth

Fund Performance: This fund has consistently beaten its benchmark in Contra segment and provided 15.98% annualized returns in the last 3 years. In the last 1 year, it gave 2.91% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 2.91% returns in the last 1 year. Groww rated this fund as 4 Star. This is one of the best Equity mutual fund in India.

Fund Manager: Amit Ganatra, Taher Badshah

Launch Date31 Dec 2012
Min Investment Amt5,000
Groww Rating4star
AUM919Cr
1Y Returns2.9%

Kotak Classic Contra - Direct - Growth

Fund Performance: This fund has consistently beaten its benchmark in Contra segment and provided 14.58% annualized returns in the last 3 years. In the last 1 year, it gave 3.94% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 3.94% returns in the last 1 year. Groww rated this fund as 3 Star. This is one of the best Equity mutual fund in India.

Fund Manager: Deepak Gupta

Launch Date31 Dec 2012
Min Investment Amt5,000
Groww Rating3star
AUM140Cr
1Y Returns3.9%

SBI Contra Fund - Direct - Growth

Fund Performance: This fund has consistently beaten its benchmark in Contra segment and provided 7.6% annualized returns in the last 3 years. In the last 1 year, it gave -9.65% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided -9.65% returns in the last 1 year. Groww rated this fund as 2 Star. This is one of the best Equity mutual fund in India.

Fund Manager: Rama Iyer Srinivasan

Launch Date31 Dec 2012
Min Investment Amt5,000
Groww Rating2star
AUM1,488Cr
1Y Returns-9.7%

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What is the investment style of contra mutual funds?

Financial planners suggest that individuals should look at this category as a diversification opportunity, that is, only after they have invested a significant portion of their mutual fund portfolio in large-cap, equity diversified funds. Even then, invest only 10-15% of your portfolio in these funds. Remember, these funds invest in ‘out-of-flavor’ themes and, hence, may not perform in the short-term. Therefore, only those with an investment horizon of about up to 5 years should consider this option.

Do I need to invest in contra mutual funds?

No. There is no need to. Among the available investment options, mutual funds are but one choice. You can choose them if they are suitable for your need.

When should I invest in contra mutual funds?

This is contextual. If you do not wish to invest directly in stocks (because you have better things to do or just don’t feel like it), you can choose equity mutual funds (defined below). If you would like to lower your tax outgo compared to a fixed or recurring deposit and if possible with better returns, you can choose debt mutual funds (defined below). The clearer you are about your need, the faster and confident you will be in taking decisions regarding mutual funds – well, this applies to anything in life!

Who issues contra mutual funds?

Asset management companies (or AMCs or fund houses) create mutual funds. All AMCs will have to be approved by the government body, Securities and Exchange Board of India (SEBI). All mutual funds have to be whetted by SEBI before it is open for the public to invest.

What does investing in contra mutual funds actually mean?

Suppose a mutual fund invests in ten stocks and total current market value of these stocks is 1.1 Crore. Out of this, the AMC deducts say, 0.1 Crore for operating the fund (this is known as the expense ratio). So the net value is 1 crore. Now the AMC will divide this 1 Crore into say, 10,000 parts. These parts are known as units. The cost of one unit is 1Cr/10,000 = Rs. 1000. This is known as the Net Asset Value (NAV) of the mutual fund. Suppose the AMC has set a minimum investment requirement of Rs. 500. Then if you pay Rs. 500, you will get 0.5 units of the fund. Remember that the cost of one unit is the cost when you made the purchase. Suppose after one year, the NAV has fallen to Rs. 700 per unit and you wish to exit the fund (also known as redemption), then you sell your 0.5 units back to the AMC and get 0.5 x Rs. 700 = Rs. 350 back. Yes, you invested Rs. 500 and got back Rs. 350 – a loss of 150 over a year. The point is, that you buy units at current NAV and sell units (fully or partially) at current NAV. This is what investing in mutual fund actually means.

Do contra mutual fund guarantee returns?

Well, sales guys would love to tell you that “over the long term” you will get good returns from mutual funds, but the truth is, there is no guarantee. As the above example shows, you buy at current market value and sell at the current market value. Anything, literally anything can happen in between spectacular returns or spectacular losses. Unless you are mentally ready to accept this and learn how to minimise this risk, do not invest in mutual funds.

Are contra mutual funds safe to invest in?

That depends on what you mean by safe! If by safe you mean capital protection – that is, you invest Rs. 500 and even if returns are zero, your Rs. 500 is safe

How to invest in contra mutual funds on Groww?

One of the best ways to hedge against the small-cap volatility is to adopt a phased approach, also known as Systematic Investment Plan (SIP) approach. We are sure that you must be aware of SIP and its benefits. Buying in small quantity but buying regularly provides you with faster growth. On Groww.in, all transactions to and from AMC is done via BSE. When you decide to invest in a large cap mutual fund of your choice, you choose that mutual fund on the website and click ‘invest’. Following that, you are redirected to the BSE page where you make the payment. BSE then directs your money to the AMC managing your mutual fund. To be assured at your end, you can visit the individual AMC website after the payment. You would be able to see all your purchased units against your folio number.

How long does it take to start investing in contra mutual funds if I do not have a KYC?

It is not possible for any investor to start investing in mutual funds without having completed the KYC process. Under the Prevention of Money Laundering Act (PMLA), Know Your Customer (KYC) norms have been mandated to track the legality of funds used in an investment. KYC is a one-time process which every first-time mutual fund investor needs to follow, to be able to invest in a mutual fund. KYC process on Groww can be completed in 2-3 days. KYC can be completed online with the help of E-KYC or electronic KYC. E-KYC Aadhar (based on OTP) : Investor can use online KYC facility using just the aadhar card number and PAN number, by visiting the website and following the easy process. After entering relevant details like aadhar and PAN number, investor will receive an OTP and KYC will be completed instantly. However, one can invest only up to ₹50,000 per fund house per year under this method.

When is the right time to start investing in contra mutual Funds?

The answer to this question depends on the following criteria: 1) the rating and performance of mutual fund you are investing into 2) the amount of risk you are willing to take Depending on the above factors let's go ahead: 1) the performance of mutual fund you are investing into makes a lot of difference since a lot of research needs to be done before investing. i) how that particular fund is diversifying its assets since many of funds are sector funds and some others put a lot of money into one sector like banking/finance. ii) But if that particular sector doesn't perform well in the long term you would end up losing your money iii) Some sectors like FMCG (HUL, Dabur) or automobile like Maruti Suzuki(because of innovations it brings in) almost make profits throughout the year and hence it's very advantageous to invest in them for long-term in these sectors. Investment time: more than 3 years. 2) The amount of risk you are willing to take i) It is important since if you want to invest in low-risk funds, debt funds will be the best option(moderate returns, low risk) investment time period: less than 1 or 1.5 years ii) But if you want high returns, more diversification equity mutual funds will be the best since higher the risk, more will be the returns.Investment time: depending on the performance of fund (on an average 4 or greater than 4 years) iii) For a balanced portfolio, you may invest into balanced mutual funds where there is a combination of both equity and debt mutual funds which will again help you to invest for a good duration like less than 2-3 years.

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Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.
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