Invesco India Contra Fund: Identifying Contrarian Opportunities

Therefore, Contra funds can act as an effective strategy for portfolio diversification. It works as a good hedge against market corrections.

Invesco India Contra Fund (IICF) has done well to realise the full potential of its contrarian stock picks and create significant wealth for investors in the long run.

Data as on July 07, 2021
(Source: ACE MF)

IICF has time and again maintained its top spot in the contra funds category. It has distinctly outperformed the benchmark S&P BSE 500 - TRI across most time periods. Even though IICF underperformed the index in the last 1 year, its returns over the 5-year and 7-year periods have been remarkable. During this time frame, it has managed to generate an alpha of around 3-4 percentage points.

IICF has shown reasonable volatility in performance, facilitating it to generate superior risk-adjusted returns for its long-term investors. The fund's Sharpe ratio of 0.16 is ahead of its benchmark and in line with the category average. These factors make it a prominent contender in the category.

Investment strategy of Invesco India Contra Fund

IICF follows contrarian investment strategy to timely pick fundamentally sound stocks from sectors that are temporarily out of favour or beaten down stocks that are available at a significant discount. The fund managers pick 'neglected stocks' with strong asset values while focusing on under-owned sectors carrying high growth potential. The aim is to have a first mover advantage by investing in these sectors/stocks, therefore increasing the prospects of long term out-performance.

The fund managers utilize a blend of the top-down and bottom-up approach to identify and invest in potentially undervalued stocks across sectors. They believe in incubating such stocks for a while before these stocks find favour with rest of the market.

In terms of asset allocation, the fund is mandated to invest a minimum 65% of its assets in equity and equity related instruments (including derivatives) and maximum 35% can be invested in debt (fixed and floating) and money market instruments. IICF maintains a large-cap bias along with significant allocation to stocks in the mid and small-cap segment. It adjusts the market cap depending on the relative attractiveness of the segment and growth potential.

IICF usually holds a well-diversified portfolio of 45-55 stocks at any point of time. As on May 31, 2021, IICF held a fairly diversified portfolio of about 49 stocks, with the top 10 stock holdings accounting for around 46.8% of its assets. Highly liquid names like Reliance Industries, ICICI Bank, HDFC Bank, Infosys, Axis Bank, and Reliance Industries currently appear among top holdings in the fund's portfolio. Most of them have been among the core contenders in IICF's portfolio for a long time. SBI, Ultratech Cement, Sun Pharma, L&T, Ashok Leyland, etc. currently stand among the other top holdings in the portfolio.

Infosys, ICICI Bank, HDFC Bank, Reliance Industries, Axis Bank, etc. have been among the top contributors to IICF's performance over the one year. HCL Technologies, Motherson Sumi Systems, Bharat Electronics, Sun Pharma, Tech Mahindra, Ultratech Cement, KNR constructions, among others were the other top gainers in the portfolio.

In terms of sector concentration, the top five sectors in IICF's portfolio accounted for over 60% of its assets. The fund held higher weightage to Banking (26.5%) followed by Infotech (13%), Pharma (7.9%), Engineering (6.9%), Finance (6.6%), Petroleum Products (5.7%), and Auto (5.3%). Power, Construction, Cement, Metals, and Auto Ancillaries figure among the other prominent sectors in the fund's portfolio.

Suitability

IICF is a process-driven fund that holds a superior performance track record that speaks about its ability to create wealth for investors. Over the years, the fund has delivered market beating returns across time periods and market cycles. The fund managers, Mr Taher Badshah and Dhimant Kothari bring immense experience to IICF.

The fund is well-equipped to change as per the market dynamics. While it has the ability to manage downside risk during extreme market conditions, it can gear up and actively participate in the market rallies too. The fund gives high weightage to fundamentals, long-term price momentum and outlook of stocks in its portfolio. This helps it maintain a lead over its peers during uncertain market phases.

As contra funds invest in 'out-of-favour' themes, they may temporarily underperform in the short term, and hence deserve patience. This makes IICF suitable for investors with high-risk tolerance and a time horizon of at least 5 years.

Warm Regards,
Divya Grover
Research Analyst

PS: If you are looking for quality mutual fund schemes to add to your investment portfolio, I suggest you subscribe to PersonalFN's premium research service, FundSelect. PersonalFN's FundSelect service provides insightful and practical guidance on which mutual fund schemes to Buy, Hold, and Sell.

Currently, with the subscription to FundSelect, you could also get Free Bonus access to PersonalFN's Debt Fund recommendation service DebtSelect. Under DebtSelect, we give high weightage to schemes displaying worthy portfolio characteristics. We avoid debt mutual fund schemes that aim for higher yields by taking undue higher credit risk with substantial exposure in instruments issued by private issuers.

If you are serious about investing in a rewarding mutual fund scheme, Subscribe now!

Note: 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.

Join Now: PersonalFN is now on Telegram. Join FREE Today to get ‘Daily Wealth Letter’ and Exclusive Updates on Mutual Funds

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

1. Money Simplified Services Private Limited;

2. PersonalFN Insurance Services India Private Limited;

3. Equitymaster Agora Research Private Limited;

4. Common Sense Living Private Limited;

5. Quantum Advisors Private Limited;

6. Quantum Asset Management Company Private Limited;

7. HelpYourNGO.com India Private Limited;

8. HelpYourNGO Foundation;

9. Natural Streets for Performing Arts Foundation;

10. Primary Real Estate Advisors Private Limited;

11. HYNGO India Private Limited;

12. Suresh Lulla;

13. I V Subramaniam.

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company; except for one of the Research Analysts holding units of Invesco India Contra Fund;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013