Equity markets are witnessing heightened volatility over the past few months owing to geo-political tensions, spiralling inflation worldwide, global central banks deciding to walk down the taper path etc. It is widely believed in the near term too Indian equities along with global markets is likely to remain volatile. Leading fund manager S Naren is of the view that while it is extremely difficult to predict how markets behave in the near term, for a long term investor, the current market correction offers a very good opportunity to invest systematically over the next 12-18 months. He further adds that he remains positive on the long term structural story of India and hence equity investors who are ready to be invested for the long term can consider value oriented funds.

Why Invest in Value?

Until September 2020, value was out of favour which was also the case even during 1988-89 and 2007-2008. However, as the pandemic eased, value as a theme came into focus. At a time when interest rates are poised to head higher, oil price seems to be stabilising around higher levels many of the essential industries such as metals, energy and coal have seen increasing interest among savvy investors. These were essentially those sectors which has not seen much traction during the previous market rally and hence were available at relatively cheaper valuations. With the economy gaining momentum, it is widely expected that value funds are set for a strong comeback as the economy revives.
Naren, a known value investor is of the view that value investing works well in times of inflation. Also, he notes that value investing at a time when market is elevated tends to do well as value focuses on investing in sectors which are out of favour but have long term value. Therefore, one can consider value funds to meet their long term goals.
The Right Fund
One of the easiest ways to determine the hallmark of a true value fund is to check how various value funds in the industry has stacked up in the recent turnaround of funds. Here, one funds which stands out in terms of performance is ICICI Prudential Value Discovery Fund. This is one of the most popular fund within the Indian mutual fund industry, be it within the value segment and even otherwise. Also, it is one of the true to label and the largest value fund, which has been consistently successful in identifying stocks whose prices are low relative to their historic performance, earnings, book value and cash flow potential. By taking exposure to such names, the fund has managed to deliver returns over long term by value unlocking.
Wealth Creation Journey
When it comes to the wealth creation journey of the fund, an SIP of Rs. 10,000 on a monthly basis since August 2004, would have yielded Rs. 1.1cr against the benchmark (Nifty 500 Value 50 TRI) return of Rs. 72 lakhs. At the same time, if an investor had invested a lumpsum of Rs. 10 lakhs, then that investment today would have been worth Rs. 2.5 cr while the benchmark return would be worth 1.3 cr. In effect, the fund has delivered a CAGR of 20.1% return over the last 18 years.
More specifically, when it comes to the performance of the last one year, the fund has generated an impressive 28%. On a three, five, and 10-year basis too, the fund has consistently managed to outperform the benchmark by delivering returns to the tune of 20.2%, 13.6% and 17.7% respectively. Also, the fund is among the top performers on 10- and 15-year basis as well.
Top 3 funds with 15- year track record
Funds 1 Year 3 Years 5 Years 10 Years 15 Years
ICICI Prudential Value Discovery Fund 27.98 20.18 13.57 17.75 16.18
Nippon India Value Fund 24.19 17.93 13.19 15.82 14.57
Invesco India Contra Fund 17.21 15.93 13.64 17.22 14.11
Source: Value Research, Data as on May 02,2022.