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SBI Contra Fund's Superior Performance: Unveiling the Mystery

Explore the concealed tactics and wisdom powering the exceptional returns of the SBI Contra Fund. Delve into the elements fueling its triumph and uncover methods to perhaps enhance your own investments with this top-ranking mutual fund.

Unveiling the Key Factors Driving the Excellence of SBI Contra Fund
Unveiling the Key Factors Driving the Excellence of SBI Contra Fund

SBI Contra Fund's Superior Performance: Unveiling the Mystery

The SBI Contra Fund, a high-risk investment option, has been outperforming its peers significantly since 2020, delivering remarkable returns to investors.

The fund, which takes a contrarian view of a business or a stock, investing in stocks other investors are not paying attention to or are likely to turn around, has seen a surge in its Assets Under Management (AUM) from approximately Rs. 1,300 crore in August 2020 to Rs. 14,607 crore by August 2023, representing a growth of 1,000%.

The exceptional performance of the SBI Contra Fund can be attributed primarily to its dynamic investment strategy. The fund follows a balanced advantage or dynamic asset allocation strategy, actively adjusting its equity and debt allocation based on market valuations and conditions. This approach has helped reduce downside risk and capture upside during market rallies since 2020.

The fund invests in contrarian, mid-to-large cap stocks that show potential for growth. SBI shares and other well-performing Indian companies with strong fundamentals and profit growth reflect themes the fund likely capitalizes on. The broader Indian equity market rebounded strongly after the COVID-19 induced downturn, benefiting funds with exposure to cyclical and recovery plays. This macro environment enhanced returns for the SBI Contra Fund due to appropriate allocation shifts.

The allocation to mid-cap stocks by the SBI Contra Fund under the new fund manager has increased significantly compared to the previous allocation to large-cap stocks. The fund's high turnover ratio is one of the factors contributing to its performance. As of August 2023, the SBI Contra Fund has the highest turnover ratio among Value and Contra Funds, with a ratio of 230.

While the SBI Contra Fund has delivered impressive returns, it's important to note that in the 3-year, 5-year, and 7-year rolling returns, the fund's performance aligns with the category average, and the outperformance is not evident in the 10-year time horizon. The fund comes with its own set of risks, such as the challenge of identifying a trend before the herd and the possibility of prolonged periods of underperformance due to the sector or stocks remaining out of favour for an extended period.

In conclusion, the SBI Contra Fund offers investors good downside protection and high returns, but it's essential to understand the risks involved and consider the fund's long-term performance before making an investment decision.

The SBI Contra Fund, a high-risk investment option in the stock-market, has garnered attention in the finance world due to its remarkable returns, largely attributed to its dynamic investing strategy. This mutual fund, which invests in contrarian, mid-to-large cap stocks, has seen a significant growth in its AUM, reflecting the success of its business model.

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