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Ventura Wealth Clients
3 min Read
Piramal Enterprises

Momentum feeds momentum and investing in value is like catching a falling knife: the chorus was getting louder until recently. However, the scenario changed quite dramatically over the last 1-2 months. Value as a theme has beaten the broader markets with S&P BSE Enhanced Value Index galloping through.

Some experts aren’t much enthused about the comeback of the value theme and opine that the intense rally has finally stoked duds. While a few others believe, value is the way to go, since stretched valuations is a serious concern now, not just in India but worldwide.

Market cap-to-GDP ratio in the US has already crossed the 180 mark. The IPO market in the world’s largest economy is in the midst of an astonishing run.  A food delivery company which brings smiles to the faces of busy, hungry (and lazy) people was on a tear on the day of its debut and rallied over 80%.

Market-cap-to-GDP ratio in India is already hovering at a decade high.

On this backdrop, we thought of evaluating the performance of value-oriented mutual funds to see how many of them benefited from the upswing in value stocks.

Value funds: fact check

Data as on December 10, 2020
(Source: ACE MF)

 Here’s what we found…

Albeit by a small margin the category of value funds managed to beat NSE 500 Total Return Index (TRI) on 1-month return, which improved the 3-month return as well. Some value funds such as IDFC Sterling Value Fund benefited from the rally in mid and small caps, offering deep value. A few others also outpaced the broader markets. HDFC Equity Fund which has been banking on PSUs, mining, capital goods companies and utility companies did well as value stocks fired.

Many of you might wonder why none of the value funds has outshone S&P BSE Enhanced Value Index. The answer lies in the composition of the Index.  Its constituents are largely mining companies, PSUs, auto companies and the beaten down banks. All of them did well. But no fund could have had high exposure to them due to their persistent underperformance in the past few years.

What should you do with value funds now that they have started doing well?

For many investors, the impulsive reaction would be to rush to redeem value funds just to get them off the radar—they have indeed tested the patience of investors. But what’s convenient need not be intelligent always. Instead of impulsively redeeming value-oriented funds,you should instead revisit your entire mutual fund portfolio at a time when markets are at an all-time high.  

Please remember you should get rid of a mutual fund scheme from your portfolio only when it:

  1. No longer has any role to play in your overall asset allocation
  2. Starts taking unwarranted risks to generate returns
  3. Deviates substantially from the indicative allocation
  4. Persistently underperforms even when its peers in the same fund category are doing well

As remains the question of value funds, the market has so far downplayed the entire theme. If you are stuck with a laggard within the value fund category, you may want to take a suitable action after consulting a qualified mutual fund expert you trust.

If momentum really feeds momentum; can’t value funds have momentum behind them?

Concluding thoughts

Diversification doesn’t only mean spreading investments across asset classes and instruments within an asset class. It essentially means, spreading risks across asset classes, instruments and investment styles that don’t move in tandem.

Important note (Please read as a disclaimer): None of the mutual fund schemes discussed in this article is a recommendation to buy hold or redeem. It’s merely an attempt to highlight the trend we observed. Hence, please consult your financial advisor before taking any decision pertaining to your mutual fund portfolio.


You may also like to read: 

  1. Standing out or outstanding: Stock preferences of HDFC Mutual Fund
  2. Can HDFC Top 100 Fund make a comeback?



We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.


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