In this category of Mutual Fund, every scheme gave more than 48% return, what is its specialty

Contra Mutual Funds : What is so special about them : Most investors investing in the market are interested in the best performing stocks. But there are some mutual funds in which investment is made by focusing on such stocks whose performance is currently poor. Due to this opposite nature, they have been named Contra Mutual Funds. The managers of contra funds look for such stocks, which are performing poorly despite being strong in terms of fundamentals. The thinking behind this is that such stocks which are currently looking weak have the hidden potential to reverse the previous trend and give great returns. In the last 1 year, all the mutual funds with the theme of contra funds have proved this to be true by giving 48 percent or more returns.

Contra funds perform well

In India, the number of mutual fund schemes that follow the concept of contra funds is not very high. According to the Association of Mutual Funds of India (AMFI), there are currently three such schemes in the country: 1. SBI Contra Fund, 2. Invesco India Contra Fund and 3. Kotak India EQ Contra Fund. All these three schemes have performed well in terms of returns in the last one year.

Also read: Investment: How correct is it to invest in corporate FDs which give higher interest than bank FDs? Are debt funds a better option?

SBI Contra Fund

1 Year Average Return (Direct): 48.40%

3 Year Average Annual Return (Direct): 30.51%

5 Year Average Return (Direct): 30.42%

Benchmark : BSE 500 Total Return Index

Asset Under Management (AUM): Rs 35,304.23 crore

Also read: Mutual Fund: When will passive hybrid funds be launched? What is the meaning of this new initiative of SEBI

Invesco India Contra Fund

1 Year Average Return (Direct): 49.79%

3 Year Average Annual Return (Direct): 23.55%

5 Year Average Return (Direct): 23.72%

Benchmark : BSE 500 Total Return Index

Asset Under Management (AUM): Rs 16,502.57 crore

Kotak India EQ Contra Fund

1 Year Average Return (Direct): 54.80%

3 Year Average Return (Direct): 26.80%

5 Year Average Return (Direct): 25.05%

Benchmark : NIFTY 500 Total Return Index

Asset Under Management (AUM): Rs 3,582.99 crore

(Source: AMFI data till 8 July 2024)

Also read: NFO: Tata launches the country’s first tourism index fund, a new way to invest in this sector full of possibilities

How much tax will be levied on the profits of contra fund

More than 65% of the investment of contra funds is in equity. Therefore, they are placed in the category of equity mutual funds. Obviously, the same income tax rules apply to them as are made for equity funds. That is, if you make a profit by selling the units of contra funds in less than 1 year, then you will have to pay 15% short term capital gains (STCG) tax on it. But if you sell after holding for 1 year or more, then annual profit up to Rs 1 lakh is tax free. If there is more profit than that, then 10% long term capital gains (LTCG) tax will be levied. That is, investing in contra funds is also good from the tax point of view.

Also read: This scheme of SBI MF is amazing, make 7 crores with just 10,000 monthly SIP!

Understand the risk before investing

The past returns of the country’s contra funds have been quite good, but it cannot be considered a guarantee of similar performance in the future. Apart from this, being equity funds, contra funds fall into the category of very high risk investments. Therefore, keep your risk profile in mind and take the advice of your investment advisor before deciding to invest.