India’s best performing contrarian equity fund doubled down on these stocks last month

With the stock market indices slowly clawing their way back after the deep correction from the recent peak, investors have been scrambling to look at value stocks even if that means taking a contrarian stance from the momentum in the market.

One way to play the market with that investment theme is to pick value-oriented equity mutual funds to the basket. This pack seeks to pick stocks that are priced significantly lower than what the fund management team believes is their true worth.

Overall, this set of funds have not done anything great over the last one year in line with the overall market. But some funds stand out.

The SBI Contra fund has consistently generated double-digit annual returns over the medium term and has topped the charts among its peers if one looks at one year and beyond as a holding period.

The fund has maintained a diversified portfolio with as many as 64 stocks with the top ten holdings comprising just about a quarter of its portfolio. The fund had assets of Rs 4,670 crore as of June 30, 2022.

Compared to the category average, the fund has maintained its conviction on small and mid-cap stocks despite the drubbing in that domain. These stocks comprise around 55% of its portfolio compared to just about 30% of the total for the fund category.

If we look at sectors, it has been overweight on energy, metals and mining, capital goods, chemicals and textiles, relative to the category average. Financials is the single biggest bet for the fund but relative to the category it is less bullish on the sector.

Last month, the fund bought additional stakes in all top banks: HDFC Bank, ICICI Bank, Axis Bank and SBI besides Equitas Holdings.

It also bought additional shares of CESC, Tech Mahindra and Infosys.

On the flip side, it trimmed its holding in GAIL.

It also maintained status quo on several counters such as Tube Investments of India, ITC, HCL Tech, Reliance Industries, NHPC, Wendt, M&M, Aster DM Healthcare, Indian Hotels, Neogen, M&M Financial, NMDC, Aether, Bajaj Auto, Carborundum Universal and Gateway Distriparks.