After a six-month corrective phase that saw indices fall 15-25 per cent from their September 2024 peak, the markets have started rallying steadily over the past month or so.
Valuations are still not comfortable in many pockets of the market barring select large-cap segments.
US trade tariff uncertainties, domestic geopolitical tensions and weak corporate earnings momentum mean that sailing through uncertain markets is not going to be easy. In this environment, taking contrarian calls can be rewarding over the long term only if the stock picks that seem undervalued currently manage to rally sharply when markets discover the potential. Even otherwise, value-based approach can give comfort in the sense that overpaying can be avoided.
In this regard, Invesco India Contra Fund can be a good addition to investor portfolios. The scheme has been around for more than 18 years, and has consistently delivered above-average returns, apart from comfortably beating its benchmark.
To be sure, the fund’s approach is not deeply contrarian. However, Invesco Contra does take a different approach in terms of weightages to sectors vis-à-vis the benchmark and places bets among its top holdings on select out-of-favour sectors where markets do not seem to show interest presently.
The scheme can be considered for the core portion of your portfolio, or at least for being a key part of the satellite part if you have a medium risk appetite. The systematic investment plan (SIP) route can be taken with a horizon of 7-10 years for taking exposure to the fund.
Solid outperformer
Invesco India Contra has demonstrated a consistent performance record over the years. On a point-to-point basis, the fund has given compounded annual returns of 17.3 per cent, 25.4 per cent, 28.4 per cent and 17.6 per cent respectively over one, three, five and 10-year periods, respectively.
When 5-year rolling returns are taken over the January 2013-April 2025 period, the scheme has beaten its benchmark, BSE 500 TRI, 100 per cent of the time.
Also, over the aforementioned period, when 5-year rolling returns are considered, Invesco India Contra has given more than 12 per cent returns for 88 per cent of the time, and in excess of 15 per cent nearly 64 per cent of the time.
A monthly SIP in the fund over a 10-year period would have delivered 19.2 per cent returns (XIRR), while systematic investments in the BSE 500 TRI would have earned about 15.6 per cent.
All data points pertain to the direct plan of the fund.
The fund has an upside capture ratio of 111.8, indicating that its NAV rises much more than the benchmark during rallies. But more importantly, it has a downside capture ratio of 87.8, suggesting that the scheme’s NAV falls less than the BSE 500 TRI during corrections. A score of 100 indicates that a fund performs in line with its benchmark. This is based on data from May 2022-May 2025.
Steady moves
The fund seeks to maintain a somewhat multi-cap approach to stock selection over the years, but the mix has been changing steadily. Earlier, in the immediate few years after Covid-19, Invesco Contra had heavy allocation to large-caps, going over 70 per cent of the portfolio. That has come down over the past two years and now large cap weightage is less than 60 per cent of the portfolio. Mid and small cap exposure has thus gone over 35 per cent of the portfolio going by its recent holdings. This shift has been one of the key reasons for the fund outperforming in recent years.
However, the large-cap bias and diffused holdings (less than 2 per cent or even 1 per cent at times) in mid and small-cap names mean that the portfolio does not take a very hard knock during corrections. In fact, barring the top three stocks, the other stocks individually account for less than 4 per cent of the portfolio even among the top 10 holdings of the scheme.
The scheme does not take cash calls beyond 3-4 per cent of the portfolio and remains fully invested across market cycles.
Banks have always been the fund’s top holding. However, the other holdings are churned based on value and at times contrarian calls. So, IT, retailing and pharma stocks now find their place among the top sector holdings of the fund. In previous years, it held automobiles and FMCG among its top holdings when they were not market favourites.
Overall, a mix of mostly value picks with some growth segments figure in the portfolio.
Contrarian approaches can have periods of underperformance. Therefore, investors need to have a long investment horizon to have a rewarding return experience.
Published on May 17, 2025
