Best Contra Mutual Funds

Contra funds involve a unique style of investing to gain market advantage. Underperforming companies are targeted and carefully evaluated to discover the reason behind it. Best contra mutual funds invest in those organizations which have massive potential for growth but are unable to reach those heights due to various external factors.

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Top 10 Contra Mutual Funds

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Invesco India Contra FundEquityModerately High9.4%5star4,486
Kotak Classic ContraEquityModerately High13.8%4star874
SBI Contra FundEquityModerately High0.5%2star1,382
View All Top 10 Contra Mutual Funds

Features of Contra Mutual Fund

Contra funds are a source of long term investment, thereby attracting risk-prone investors seeking to take advantage of the growth phase.

The best contra funds only invest in underachieving companies as per SEBI regulations. A mutual fund cannot comprise both regular and contra companies at the same time.

Contra funds are different from value funds in one crucial aspect. They both seek opportunities to invest in companies with vast untapped potential. However, the underlying strategy adopted by these mutual funds is different – the best contra mutual funds aim at those companies with huge asset base and management skills, increasing its chances of growing exponentially in the future. On the other hand, value funds target those companies which already have a well-established and credible reputation. The primary reason behind the low unit prices of these companies is the external market factors influencing their extrinsic value.

Taxability

There are several tax benefits of investing in a contra Mutual Fund. Under section 80C of the Income Tax Act, the dividend earned from such mutual funds is deductible from your taxable income, up to 1.5 Lakh per annum.

The capital gains earned from the purchase and resale of a share is accountable under income tax. A tax rate of 15% has to be paid on short term capital gains (up to 36 months), while only 10% is payable on profits made for more than 36 months.

However, tax-deductible on capital gains is subject to indexation as well. Adjusting for the prevalent inflation in the country reduces the tax burden of the investors significantly.

Who Are These Funds Suited For?

The best contra fund does not yield positive results in the short term. Investors have to wait for a considerable time to realise profits. Investors targeting contra funds are risk-takers, as they gamble on the turbulent fluctuations of the stock market.

It also provides a first-mover advantage to the investors, exploiting the low share prices currently, only to enjoy substantial gains when they sell it afterwards as the share prices appreciate.

An important thing to be kept in mind while investing in any contra fund is to not fall into any ‘value traps.’ Portfolio managers of the best contra mutual funds carefully evaluate the reason behind an underperforming organization and opt for ones with the highest potential to shine in the future.

However, investing in companies which seem to have a value from a distance, and thus creating a value trap, will lead to substantial losses. The efficiency of people responsible for building the portfolio of a fund is crucial to determine the best contra fund in 2019.

The sector in which these funds are investing also determines their success rate and growth potential. A company operating in one of the major areas of an economy, with relevant assets to back up the targeted growth rate, will be an ideal place to invest in. Best contra fund 2019 target companies in capital goods and the IT sectors, as they are the leading sectors in the country as of this year.

Major Advantages

The major advantages of investing in a Contra fund are –

  • Higher profits can be earned by investing in contra funds as compared to standard equity mutual funds. Blue-chip companies have a glass ceiling on the share price growth. Thus huge profits cannot be availed, as compared to contra companies, whose share prices fluctuate at a higher rate.
  • As contra funds have not gained high popularity in the country, the minimum investment price is relatively low. Thus, the initial investment can be less in case of such funds. As the price rises in the long term, you can make substantial capital gains. Many contra funds do not charge any entry or exit load as well, lowering the cost of investing. Equity mutual funds, on the other hand, have a lot of added expenses making it a costly option.
  • Generally, contra funds are exposed during times of stagnant economic growth of the country, when the investment level is low. This implies weak and unreliable predictions of stock market indices of such small-cap companies.

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 given 16.43% annualized returns in the last three years. In the last year, its returns were 9.45%. It has continually hit its benchmark in the Equity segment.

Why to invest: It is one of the most remarkable Equity mutual funds in India. This fund has constantly outperformed other similar funds, providing 9.45% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM4,486Cr
1Y Returns9.4%

Kotak India EQ Contra Fund Direct Growth

Fund Performance: This fund has given 17.25% annualized returns in the last three years. In the last year, its returns were 13.75%. It has continually hit its benchmark in the Equity segment.

Why to invest: It is one of the most remarkable Equity mutual funds in India. This fund has constantly outperformed other similar funds, providing 13.75% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹0
AUM874Cr
1Y Returns13.8%

SBI Contra Direct Plan Growth

Fund Performance: This fund has given 5.16% annualized returns in the last three years. In the last year, its returns were 0.47%. It has continually hit its benchmark in the Equity segment.

Why to invest: It is one of the most remarkable Equity mutual funds in India. This fund has constantly outperformed other similar funds, providing 0.47% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM1,382Cr
1Y Returns0.5%

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