If you’re looking for a mutual fund that has stood the test of time and delivered exceptional returns, SBI Contra Fund might just be what you need. This fund, known for its contrarian investment strategy, has amazed investors by turning an investment of Rs. 1 lakh into Rs. 1 crore over the past 25 years. Not only has it multiplied investors’ money fourfold in the last five years, but it has also doubled it in just three years.
What Makes SBI Contra Fund Stand Out?
SBI Contra Fund is an open-ended equity scheme that follows a unique contrarian investment approach. This strategy focuses on investing in undervalued stocks that have strong fundamentals but are underperforming in the market. Essentially, the fund manager looks for hidden gems, buying these stocks at low prices and holding onto them until the market recognizes their true value. This long-term investment philosophy has yielded massive gains for investors over the years.
Understanding the Contrarian Strategy
The contrarian investment strategy works by going against the current market trends. While most investors may shy away from stocks that are currently underperforming, a contrarian investor sees potential in them, provided they have strong fundamentals. This approach involves thorough research and identifying companies that are temporarily undervalued but are expected to grow in the long run.
In the case of SBI Contra Fund, the fund manager follows a top-down and bottom-up approach to stock selection. At least 65% of the fund’s assets are invested in such contrarian stocks, while the remaining portion is allocated to other shares, debt instruments, or money market instruments. This balanced approach helps optimize returns while managing risks.
SBI Contra Fund’s Performance Over the Years
Launched on July 5, 1999, SBI Contra Fund has been consistently delivering impressive returns. Its average annual return (CAGR) since inception is 20.1%. Let’s take a closer look at its performance:
- 1-Year Return: 43.89%
- 3-Year Return: 27.42%
- 5-Year Return: 31.65%
- Since Inception (25 Years): 20.1%
Benchmark Comparison
SBI Contra Fund has outperformed its benchmark, the BSE 500 TRI index, across different time frames:
- 1-Year Benchmark Return: 40.85%
- 3-Year Benchmark Return: 18.39%
- 5-Year Benchmark Return: 22.38%
- Since Inception Benchmark Return: 16.28%
The fund’s superior performance over its benchmark reflects the effectiveness of its contrarian investment strategy.
How Rs. 1 Lakh Became Rs. 1 Crore in SBI Contra Fund
The power of compounding and the fund’s consistent performance have turned Rs. 1 lakh into a staggering Rs. 1.02 crore over 25 years. Here’s how the investment grew over different time periods:
- 1 Year: Rs. 1,44,180
- 3 Years: Rs. 2,07,020
- 5 Years: Rs. 3,96,100
- 25 Years: Rs. 1,02,03,280 (Rs. 1.02 crore)
Key Features of SBI Contra Fund
Here are some important details about the SBI Contra Fund that make it an attractive option for long-term investors:
- Minimum Lump Sum Investment: Rs. 5,000
- Minimum Monthly SIP: Rs. 500
- Risk Level: Very High Risk
- Asset Under Management (AUM): Rs. 41,416.6 crore (as of September 30, 2024)
- Expense Ratio (Regular Plan): 1.51%
- Expense Ratio (Direct Plan): 0.58%
- Exit Load: 1% on exit within 1 year, no exit load after 1 year
The fund charges an expense ratio to manage the portfolio, which is relatively low for the direct plan, making it cost-effective for long-term investors.
Top Holdings (As of September 30, 2024)
The SBI Contra Fund’s portfolio consists of top-performing companies with strong fundamentals:
- HDFC Bank Ltd.: 5.33%
- Reliance Industries Ltd.: 3.39%
- GAIL (India) Ltd.: 2.39%
- Kotak Mahindra Bank Ltd.: 2.30%
- Whirlpool of India Ltd.: 2.24%
- Cash and Cash Equivalents: 3.53%
Sector Allocation of the Fund
The fund has a diversified sector allocation to mitigate risks and maximize returns:
- Financial Services: 20.96%
- Oil, Gas, and Consumer Fuel: 9.66%
- Information Technology: 9.03%
- Healthcare: 7.21%
- Government Bonds (Sovereign): 5.79%
- FMCG: 5.33%
The diversified sector allocation ensures that the fund is well-balanced and has exposure to various industries that have the potential to outperform in the long run.
Meet the Fund Managers
The success of SBI Contra Fund can be attributed to the expertise of its fund managers:
- Dinesh Balachandran – With over 22 years of experience in the financial industry, Dinesh has been managing this fund since May 2018.
- Pradeep Kesavan – He joined SBI Funds Management in July 2021 and has been co-managing the fund since December 2023. Together, they bring a wealth of knowledge and experience to ensure that the fund continues to perform well.
Why Should You Consider Investing in SBI Contra Fund?
SBI Contra Fund is ideal for investors who:
- Are looking for long-term capital appreciation
- Are willing to invest in a high-risk, high-reward scheme
- Want to take advantage of the contrarian investment strategy, which has proven to deliver outstanding returns over time
- Have the financial capacity to weather market volatility and are looking for a diversified portfolio
This fund is particularly suitable for those who believe in the power of buying undervalued stocks and are patient enough to wait for their full potential to be realized.
Key Takeaways for Investors
SBI Contra Fund has demonstrated exceptional performance through its contrarian strategy. While it comes with a higher level of risk, the rewards have been substantial for those willing to stay invested for the long term. With a track record of turning Rs. 1 lakh into Rs. 1 crore over 25 years, it remains one of the most attractive options for investors seeking substantial wealth creation.
However, it’s essential to consult your financial advisor before investing in any mutual fund. While SBI Contra Fund has a history of delivering high returns, it’s crucial to understand that mutual funds are subject to market risks, and past performance is not always indicative of future results.
