A value mutual fund is a type of equity fund which invests in undervalued stocks. An undervalued stock is one with strong business fundamentals and high intrinsic value, but which may be trading at a discount on a temporary basis. It could be due to short-term market fluctuations or lack of interest or awareness about the sector as a whole. When investing in value stocks, a fund manager bets on the fact that the market is yet to discover the true potential of the stock, but will do so in the long term. Choosing the right value mutual fund can fetch the investors substantial returns and help them maximise their portfolio value.
In this blog, we will look at the best value funds in India in 2023, as well as a few other details.
Take a look at the list of the best value funds in India 2023:
|Value Funds||Fund Size|
|ICICI Prudential Value Discovery Fund – Direct Plan – Growth||₹27449.73 crore|
|UTI Value Opportunities Fund – Direct Plan – Growth||₹6740.43crore|
|IDFC Sterling Value Fund – Direct Plan – Growth||₹5,145.25 crore|
|Nippon India Value Fund – Direct Plan – Growth||₹4641.67 crore|
|Templeton India Value Fund – Direct – Growth||₹845.01 crore|
|JM Value Fund – (Direct) – Growth||₹163.86 crore|
|HSBC Value Fund – Direct Plan – Growth||₹7781.82crore|
|Tata Equity PE Fund – Direct Plan – Growth||₹5,119.81 crore|
|HDFC Capital Builder Value Fund – Direct Plan – Growth||₹5227.16crore|
|Quantum Long Term Equity Value Fund – Direct Plan – Growth||₹837.17 crore|
|Indiabulls Value Fund – Direct Plan – Growth||₹9.71 crore|
|Aditya Birla Sun Life Pure Value Fund – Direct Plan – Growth||₹3,798.33 crore|
|Canara Robeco Value Fund – Direct Plan – Growth||₹758.21crore|
|Quant Value Fund – Direct Plan – Growth||₹601.33 crore|
|DSP Value Fund – Direct Plan – Growth||₹576.95 crore|
Provided below are the details of each of the best value funds 2023:
This is one of the top value mutual funds and was launched on January 1, 2013. Over 92% of this fund is currently invested in equities, while allocation to cash and debt are 6.7% and 1%, respectively. The value fund has over 23% exposure in the financial sector, closely followed by energy at 17.9% and healthcare at 15.2%. Since its launch, it has generated 17.4% as average annualised returns.
This value fund has delivered an average annualised return of 12.6% since the day it was launched. The minimum amount required for additional investment and SIP investment is ₹1,000 and ₹500 respectively. In terms of allocation, the scheme has 29.4% investment in the financials, 11.2% in technology, 10.7% in automobiles, 9.4% in healthcare, 6% in services and 19.6% in other sectors.
IDFC Sterling Value Fund has delivered average annualised returns of 16.2%. It has 22.5% exposure in the financial sector, 10.2% in automobiles, 11.9% in consumer staples, 8.6% in healthcare, 6.9% in capital goods and 6.9% in others.
Nippon India Value Fund invests 32.5% in the financial sector, 9.7% in healthcare, 9.2% in technology, 8.8% in construction, 9.4% in energy and 24.2% in other sectors. Since this scheme was introduced in the financial market, it has generated an average annualised return of 14%.
This value mutual fund has delivered 14% average annualised returns since the date of launch. While the minimum additional investment is ₹1,000, the minimum SIP investment is ₹500. Templeton India Value Fund has made 31.1% investment in the financial sector, 22.1% in energy, 8.5% in technology, 6.3% in capital goods and 18.1% in others.
The JM Value Fund currently invests 97.3% in equities and 2.7% in cash. If we look at its sectoral allocation, it invests 24.8% in the financial sector, 12% in capital goods, 7.8% in energy, 11.9% in technology, 8.1% in consumer staples and 8% in others. Since its launch on January 2, 2013, it has delivered an average annualised return of 14% and is one of the best value funds in 2023 to invest in.
The HSBC Value Fund has delivered 17.7% average annualised returns since its launch on January 1, 2013. The scheme currently invests 99.1% in equities and 0.9% in cash. When it comes to sectoral allocation, HSBC Value Fund invests 28.4% in the financial sector, 8.3% in consumer staples, 12.5% in construction, 8.2% in technology, 7.9% in automobiles and 15.5% in others.
Tata Equity PE Fund since its inception has successfully delivered 15.7% in average annualised returns. This value fund currently invests 95% in equities and 5% in cash. It invests 39.6% in the financial sector, 15.9% in energy, 13.4% in consumer staples, and 9.8% in automobiles among other sectors.
HDFC Capital Builder Value Fund currently invests 100% in equities. It has 32.1% exposure in the financial sector, 12.7% in technology, 8.6% in healthcare, 7.2% in consumer staples, 6.9% in automobiles among other sectors. Since this value fund was launched on January 1, 2013, it has generated 14.7% average annualised returns over the years.
This value mutual fund currently has 37.9% exposure in the financial sector, followed by 18.3% in technology, 17.5% in automobile, 9.4% in energy, 5.5% in healthcare among other sectors. It was launched on March 13, 2006, and since then it has delivered 13.% as average annualised returns. The minimum amount required for additional and SIP investment is ₹500.
Indiabulls Value Fund has exposure in financial, technology, energy, consumer staples and automobile sectors among others. It has 47.50% investments in giant cap stocks, 20.85% in large cap stocks, 22.73% in mid cap stocks, 8.85% in small cap stocks and 0.06% in tiny cap stocks. It has delivered 9.1% since its inception.
This value mutual fund currently invests 98.4% in equities and 1.6% in cash. If we look at sector-wise allocation, we will see that the scheme invests 29.5% in the financial sector, 13.3% in technology, 10.5% in metals and mining, 6.6% in automobiles, 5.7% in capital goods among other sectors. Since this scheme’s inception, it has delivered an average annualised return of 15.3%.
This is one of the best value funds of 2023 and it currently has an exposure of 96.2% in equities and 3.8% in other assets. Sector-wise, it has 35.7% exposure in the financial sector, 9.4% in technology, 7.2% in healthcare, 8.4% in consumer staples, 8.9% in energy among other sectors.
Quant Value Fund currently has 99.9% of its investments in equities and 0.1% of investments in cash. This scheme has 17.4% exposure in the financial sector, 15.6% in services, 11% in construction, 11.4% in energy, 10.2% in chemicals among other sectors. Since its inception, the scheme has generated 7.64% in average annualised return.
The DSP Value Fund currently invests 90.8% of its assets in equities and 9.2% in cash. The fund has delivered 13.95% in average annualised returns since inception.
*Data taken from respective AMC websites on Feb 28, 2023. Sata for illustrative purposes only. Past performance is no guarantee of future returns.
The points given below will help you understand what types of investors will find value mutual funds suitable for their financial needs:
There are two ways by which you can invest in value mutual funds–through offline and online methods. First, let us look at the offline procedure.
Follow these steps to invest in a value mutual fund offline:
Visit the nearest branch of the Asset Management Company (AMC).
Do not forget to carry a cancelled cheque, proof of identity, proof of address, PAN card, passport size photographs, bank account details and other KYC documents.
Fill up the application form and submit all the necessary documents.
To begin investing in your chosen value mutual fund, transfer the initial investment amount.
Another option you can consider is investing in a value fund through a broker/distributor if you are unable to find a suitable fund house. Please keep in mind that you will have to pay brokerage fees through a higher expense ratio if you avail the services of a broker.
The online procedure for investing in value mutual funds saves the time of investors. Take a look at the steps given below:
Step 1: Conduct thorough research about the value fund and compare various schemes and evaluate the future value of your shortlisted schemes.
Step 2: Select a fund most aligned with your investment goals and risk profile.
Step 3: Visit the official website of the AMC offering this value fund and navigate to the ‘Mutual Funds’ section.
Step 4: Click on your preferred investment mode, i.e. SIP or lumpsum.
Step 5: Fill in your KYC details including your PAN and bank account information. Click on ‘confirm’ to submit the details.
Step 6: To initiate your investment, transfer the initial investment amount. \
The first and foremost thing an investor needs to analyse before even beginning to invest is the investment goals catered to their needs. These goals vary from investor to investor as well, owing to the difference in their financial objectives. With that being said, value mutual funds are for people who want to capitalise on stocks that are temporarily selling at a discount. These generally have a higher intrinsic value and have huge return potential. Investors need to analyse all options carefully and choose the best value fund to invest in.
Since value mutual funds invest purely in equity, they are prone to high-risks. This implies that the performance of these funds are volatile and heavily impacted by market conditions. While these funds generate huge returns in bull markets, they can suffer significant losses in the bear market. Value funds are perfect for investors with a high risk appetite and those who are looking to maximise potential returns.
Fund houses levy annual charges on a mutual fund to cover their managerial and operational expenses. This is referred to as the expense ratio and it includes expenses associated with managing the investment portfolio, paying the fund manager’s fee and the administration and distribution of the scheme. Generally, expense ratios fall somewhere between 1% – 2%. The Securities and Exchange Board of India (SEBI) has set the upper limit of expense ratio at 2.25% of a fund’s total assets.
Fund performances in the past always aid the investors in choosing the right funds and investing smartly. Analysing the trajectories according to market conditions gives an idea of whether the funds were able to live up to the objectives. This will further help in gauging how the funds will perform in the future. Comparing the chosen fund performance to other similar funds in the market also maps a better picture.
When it comes to taxation, value mutual funds have the tax structure of equity funds. The capital gains earned on redemption of the units within 1 year are considered as Short Term Capital Gains (STCG) and are taxed at 15 per cent. If an investor redeems the held units after a year, the gains are classified as Long Term Capital Gains (LTCG) and are free if the profits fall under ₹ 1 Lakh, but are taxed at 10 per cent if the gains exceed ₹ 1 Lakh.
Value funds invest in undervalued stocks across various sectors of business. This aids in diversification and improves the investor’s portfolio with a significant risk-reward ratio. Investing long term can guarantee huge returns, as the prices of the stock go back up after a drop for a short span of time.
The level of volatility and the risks involved in the case of a bear market are lower when compared to other equity funds where the values significantly drop. Since the stock prices at the time of investing in a value fund are already lower, the fall won’t be as high as others in the market.
The discounted stocks in a value fund that have a great value don’t stay that way. Temporary reasons cause the prices to fall and the value increases gradually or suddenly over time. This ensures high growth potential and can multiply investors’ wealth significantly.
Value mutual funds fall under the category of equity funds and are taxed accordingly. Here, we have discussed briefly the important points related to the taxation of value funds:
If you hold the equity fund units for less than 12 months, then the capital gains you earn after redeeming your investment will be classified as short term capital gains (STCGs). The applicable tax rate for STCGs is 15% plus 4% cess.
On the other hand, if the holding period of equity fund units exceeds 12 months, then the capital gains are classified as long term capital gains (LTCGs). An important feature you need to keep in mind is that LTCGs up to ₹1 lakh in a financial year will be tax-free. Long term capital gains above this threshold will be taxed at 10% plus a 4% cess. No indexation benefit is provided.
Investing in one of the best value funds is always a good idea if you’re a novice in equity investments or otherwise. Carefully analyse all the options at hand and choose the right fund for you without giving into choice fatigue. Mutual funds are subject to market risks, so make sure to read all the scheme related documents carefully.
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Value mutual funds are open-ended equity schemes that follow the value investment strategy popularised by the likes of Warren Buffet. In simple words, these schemes invest in undervalued stocks and are always on the lookout for shares currently at a discounted rate. As the market realises the real value of these stocks, it offers investors the potential to earn very high returns.
Value funds are considered good investment options because they invest in companies with a positive record of earnings, dividends and sales. Though the current value of shares is low, these companies hold great potential of generating higher returns in the future. So, value funds are ideal investment options for investors seeking portfolio diversification, long investment tenure and high returns.
Value funds, like all other equity schemes, are exposed to the possible risk of losing one’s principal amount, price risk and event risk. Moreover, value-oriented schemes, like all other mutual funds do not provide a guarantee of returns.
As mentioned, value funds are ideal investment options for individuals seeking portfolio diversification. These funds hold the potential of generating higher returns in the future and people who stay invested for a long tenure can benefit immensely. Through value fund investments, you can gain exposure to high-quality stocks across various market capitalisations.
Value mutual funds have records of high dividend yields as these schemes invest in companies with an established track record of paying dividends to investors. Moreover, these businesses have dividend distribution programs which prove to be beneficial for investors.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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