Equity Scheme - Contra Fund
Here are some key points about Equity Scheme – Contra Fund:
Contrarian Strategy: The primary objective of a contra fund is to identify stocks that are temporarily undervalued or overlooked by the market. The fund manager believes that these stocks have the potential to rebound or outperform in the future. This strategy involves going against the crowd and taking positions that are contrary to prevailing market sentiment.
Long-Term Perspective: Contra funds typically have a long-term investment horizon. The fund manager focuses on identifying companies with strong fundamentals, which may be experiencing temporary setbacks or underappreciation in the market. The goal is to hold these stocks until their value is recognized and reflected in the stock price.
Active Portfolio Management: Contra funds require active portfolio management as the fund manager needs to actively identify and select stocks that are contrary to market trends. The fund manager uses various analytical tools, fundamental analysis, and market research to identify potential investment opportunities.
Diversification: Contra funds generally maintain a diversified portfolio of stocks across different sectors and industries. This diversification helps spread the risk associated with contrarian investing and reduces the impact of any single stock’s performance on the overall portfolio.
Volatility and Risk: Contrarian investing can be associated with higher volatility and risk compared to other investment strategies. Since contra funds invest in stocks that may be temporarily out of favor, there is a possibility that the stocks may take longer to rebound or may not perform as expected. Investors should carefully consider their risk tolerance and investment horizon before investing in contra funds.
Potential Returns: Contra funds have the potential to generate attractive returns over the long term if the fund manager’s contrarian investment picks turn out to be successful. However, it’s important to note that contra funds may experience periods of underperformance, especially during market upswings when the stocks out of favor may not perform as well as the overall market.
Benchmark: Contra funds typically benchmark their performance against broad market indices such as the BSE Sensex or Nifty 50. The benchmark serves as a reference point to evaluate the fund’s performance relative to the overall market.