Contra Mutual Funds in India

by Manshu on April 19, 2012

in Investments

Contra is short for contrarian and the idea behind contra mutual funds is to invest in shares of companies that aren’t popular and have lost favor with investors.

There are several contra funds in India, and I think it is fair to say that they have not really invested in a contrarian manner. If you look at their top holdings, you will find big names that everyone is aware of and are commonly owned by a lot of other mutual funds as well.

Here is a list of all contra funds that currently exist in India along with their top 5 holdings.

1. Kotak Contra Fund: Here are its top 5 holdings as on February 29, 2012 (the latest data that I could find.

HDFC Bank 6.24%
Infosys 6.03%
ITC Ltd. 5.76%
HDFC Ltd. 4.38%
Power Grid Corporation Limited 4.31%

2. L&T Contra Fund: Here is the top 5 holding data as on March 31 2012.

Reliance Industries 6.15%
ICICI Bank 5.50%
GSK 4.75%
Federal Bank 4.03%
ITC 4.01%

3. Religare Contra Fund: Top 5 holdings of Religare as on February 29th 2012.

Infosys Ltd 6.04%
Reliance Industries 5.39%
ITC Limited 5.03%
ICICI Bank Limited 4.92%
NTPC Ltd. 4.40%

4. SBI Magnum Sector Umbrella Fund – Contra: Here are the top 5 holding of this fund as on February 29, 2012.

ICICI Bank 7.45%
Dr. Reddy’s Labs 4.10%
SBI 4.09%
Bajaj Holdings 4.03%
Exide 3.39%

5. UTI Contra Fund: Here are the top 5 holdings of the UTI Contra fund as on February 29, 2012.

Infosys 7.29%
ICICI Bank 5.73%
ITC 5.58%
Reliance 5.19%
Tata Motors 4.84%

6. Tata Contra Fund: Here are the top 5 holdings of the Tata Contra Fund as on March 30, 2012.

HDFC Bank 6.77%
Infosys 5.44%
Sadbhav Eng 5.37%
CRISIL 5.22%
GSFC 4.68%

If you look at the shares that these contra mutual funds own, nothing remarkable jumps out at you and these are the same names you would expect to find in any other mutual fund that invests in equity in a diversified manner.

I haven’t included the expenses or returns of these funds, but having researched this data – I can see that they aren’t particularly impressive either.

I don’t really think of any of these funds as contra funds, and if I bought them ever I would think that I have bought a diversified mutual fund which has the word “contra” in its name and nothing more.

In fact I’m not quite sure whether you should buy something just because it is contrarian and how sound that philosophy really is. You should buy a share because you see value in it not because no one else owns it or you may just find that there was a good reason why no one else owned it!

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