{"id":1178,"date":"2019-10-04T05:11:59","date_gmt":"2019-10-04T05:11:59","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=1178"},"modified":"2019-10-04T06:20:48","modified_gmt":"2019-10-04T06:20:48","slug":"invesco-india-contra-fund-moving-against-the-herd","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/10\/04\/invesco-india-contra-fund-moving-against-the-herd\/","title":{"rendered":"Invesco India Contra Fund: Moving Against The Herd"},"content":{"rendered":"\n

Equities are usually driven by prevailing sentiments in the\nmarket. These sentiments may cause some fundamentally sound stocks to be\ninappropriately priced in the short run. Investors usually tend to avoid such\nstocks due to fear of losing out. However, in the long run some of these stocks\nmay grow to reflect its true value and reward investors for their patience.<\/p>\n\n\n\n

Contra funds seek to find opportunities in such stocks that are currently out of favour with potential to gain in the future. Invesco India Contra Fund<\/a> is one such fund which looks to identify such hidden opportunities and bet against the herd.<\/p>\n\n\n\n

Launched in April 2007, IICF has a corpus of Rs 3,992 crore,\nwhich makes it the largest fund in its category. The fund is managed by Mr Amit\nGanatra (since August 2012) and Mr Taher Badshah (since January 2017).<\/p>\n\n\n\n

Investment objective:<\/strong>\nInvesco India Contra Fund aims to generate capital appreciation by investing\npredominantly in equity and equity related instruments through contrarian\ninvesting.<\/p>\n\n\n\n

Graph 1: Growth of Rs 10,000, if invested in IICF 5\nyears ago<\/em><\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Had you invested Rs 10,000 in IICF five years back on October 01, 2014, it would have grown to Rs 18,200 as on October 01, 2019. This translates into compounded annualised growth rate of 12.72%. In comparison a simultaneous investment of Rs 10,000 in its benchmark S&P BSE 500 – TRI would now be worth Rs 15,363 (a CAGR 8.97%). As can be seen in the chart above, the fund has generated significant alpha over its benchmark in the last five years.<\/p>\n\n\n\n

Graph 2: IICF Year-on-Year Performance<\/em><\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

The year-on-year performance comparison of\nIICF vis-\u00e0-vis its benchmark S&P BSE 500 – TRI shows that the fund\noutperformed the benchmark in 6 out of last 10 calendar years. The fund\nperformed better than the benchmark in CY 2009, CY 2011 and CY 2014 to CY 2017.\nIts performance was nearly in line with the benchmark in CY 2013. However, in\nCY 2018 and in the current year the fund has registered negative returns and trailed\nthe benchmark.<\/p>\n\n\n\n

Table 1: <\/strong>IICF Performance vis-\u00e0-vis\ncategory peers<\/strong><\/em><\/p>\n\n\n\n\n\t\n\t\t\n \n \n \n \n
Scheme Name<\/strong><\/td>\n Corpus (Cr.)<\/strong><\/td>\n 1-year (%)<\/strong><\/td>\n 2-year (%)<\/strong><\/td>\n 3-year (%)<\/strong><\/td>\n 5-year (%)<\/strong><\/td>\n Std Dev<\/strong><\/td>\n Sharpe<\/strong><\/td>\n <\/tr>\n
Invesco India Contra Fund<\/a><\/u><\/td>\n 3,992<\/td>\n 0.02<\/td>\n 12.89<\/td>\n 16.00<\/td>\n 19.58<\/td>\n 14.58<\/td>\n 0.09<\/td>\n <\/tr>\n
Kotak India EQ Contra Fund<\/a><\/u><\/td>\n 819<\/td>\n 4.16<\/td>\n 13.59<\/td>\n 15.75<\/td>\n 14.77<\/td>\n 12.17<\/td>\n 0.10<\/td>\n <\/tr>\n
SBI Contra Fund<\/a><\/u><\/td>\n 1,309<\/td>\n -8.85<\/td>\n 3.05<\/td>\n 7.20<\/td>\n 11.13<\/td>\n 15.09<\/td>\n -0.10<\/td>\n <\/tr>\n
S&P BSE 500 – TRI<\/td>\n  <\/td>\n 0.07<\/td>\n 9.47<\/td>\n 12.54<\/td>\n 12.81<\/td>\n 13.41<\/td>\n 0.03<\/td>\n <\/tr>\n <\/tbody>\n<\/table>\n\n\n\n

Returns are on a rolling basis and in %, calculated using Direct Plan –\nGrowth option. Those depicted over 1-Yr are compounded annualised.
\nData as on October 01, 2019
\n(Source: ACE MF)<\/p>\n\n\n\n

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes. <\/strong><\/p>\n\n\n\n

The universe of contra funds is fairly small with just three funds in the category. IICF outperformed the benchmark in 2-year, 3-year and 5-year rolling period but trailed in the 1-year rolling period.<\/p>\n\n\n\n

While IICF stood as the category topper on a 3-year and 5-year rolling return basis, it stood behind Kotak India EQ Contra Fund<\/a> in 1-year and 2-year rolling periods. However, the fund fared far better than SBI Contra Fund<\/a> during this period.<\/p>\n\n\n\n

In terms of risk-return parameters, IICF registered higher volatility as compared to the benchmark and average category peers. Nevertheless, it has managed to deliver decent risk-adjusted returns for the investors.<\/p>\n\n\n\n

Investment strategy of IICF<\/strong><\/p>\n\n\n\n

Being a contra fund, IICF is mandated to invest at least 65% of its assets in equity and equity related instruments following a contrarian investment strategy. IICF looks to find hidden opportunities backed by research and expertise. It aims to select mispriced and out of favour stocks of fundamentally sound companies that have potential to grow in the long-term, and stay invested until full potential is realized. <\/p>\n\n\n\n

The fund follows bottom-up approach to select companies\ntrading below fundamental value, companies in turnaround phase and growth\ncompanies available at attractive valuations.<\/p>\n\n\n\n

It takes active overweight\/underweight sector positions\nw.r.t. the benchmark, based on the top-down view and valuation opportunities.\nThe fund invests across market capitalisation and sectors.<\/p>\n\n\n\n

Graph 3: <\/strong><\/em>IICF Portfolio Allocation And Market Capitalisation Trend<\/strong><\/em><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

IICF has the flexibility to invest across market capitalisation. The fund stays fully invested in equities with major exposure to large caps along with significant allocation in mid and small caps. The fund has reduced its exposure to large caps from around 75% a year ago to around 62% at present. Meanwhile, allocation towards mid-caps has been increased gradually from around 10% a year ago to around 23% at present. The average holding in small caps in the last one year is around 11%. Rest of the holdings is maintained in the form of cash equivalents.<\/p>\n\n\n\n

Graph 4: <\/strong>IICF Top Portfolio\nHoldings<\/strong><\/em><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Holding (in %) as on August 31, 2019
\n(Source: ACE MF) <\/p>\n\n\n\n

IICF held 48 stocks in its portfolio as on August 31, 2019\ndiversified across sectors. The top 10 stocks constitute 46.6% of the total\nholdings. HDFC Bank tops the list with an allocation of 8.4%, followed by ICICI\nBank (7.5%), Infosys (5.7%), Larsen & Toubro (4.9%) and ITC (4.5%). Rest of\nthe stocks in the top 10 holdings have an allocation of around 3-4% each.<\/p>\n\n\n\n

In terms of sector wise holdings, the fund has highest exposure to Banking at 21.6%, with another 7% in Finance. Infotech (12.8%) has the next highest allocation in the portfolio while Engineering and Consumpution follow behind with an allocation of around 7% each. Auto and ancillaries, Pharmaceuticals, Petroleum Products and Power are the other prominent sectors in the portfolio.<\/p>\n\n\n\n

Top Contributors<\/strong><\/p>\n\n\n\n

Among the stocks in the portfolio, ICICI Bank contributed\nthe most to the fund\u2019s return in the last one year with a weighted return of 1.1%.\nInfosys, Apollo Hospitals Enterprise, HDFC Bank and Gujarat State Petronet were\nthe other top contributors to the portfolio gains.<\/p>\n\n\n\n

The stocks that eroded portfolio gains the most were ITC,\nMahindra & Mahindra, Exide Industries, Equitas Holdings, and NALCO.<\/p>\n\n\n\n

Suitability of IICF<\/strong><\/p>\n\n\n\n

IICF remains fully invested in equities, with its portfolio diversified\nacross sectors and market capitalisation. Being a contra fund the scheme takes\nopposing view than the general popular opinion. Hence the fund may at times underperform\nover shorter time period. It is suitable for investors having tolerance to\nvolatility and high risk appetite with an investment horizon of 5 years or\nmore.<\/p>\n\n\n\n

The fund has performed well, especially during longer time\nframes and has delivered decent risk-adjusted returns for its investors. <\/p>\n\n\n\n

Note: <\/em><\/strong>This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy \/ Hold \/ Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant\/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.<\/em><\/p>\n\n\n\n

This article first appeared on PersonalFN here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Equities are usually driven by prevailing sentiments in the market. These sentiments may cause some fundamentally sound stocks to be inappropriately priced in the short run. Investors usually tend to avoid such stocks due to fear of losing out. However, in the long run some of these stocks may grow to reflect its true value…<\/p>\n","protected":false},"author":5,"featured_media":1183,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1178"}],"collection":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/comments?post=1178"}],"version-history":[{"count":4,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1178\/revisions"}],"predecessor-version":[{"id":1188,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/1178\/revisions\/1188"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media\/1183"}],"wp:attachment":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media?parent=1178"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/categories?post=1178"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/tags?post=1178"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}