SBI Contra Fund: When turbocharging capital creation against the wind

SBI Contra Fund, launched in July 1999, has consistently ranked in the top 30th percentile of the value/contra fund category of the CRISIL Mutual Fund Ranking (CMFR) for three consecutive quarters through April-June 2023.

The fund’s month-end assets under management increased to Rs 14,649 crore in August 2023 from Rs 1,339 crore in August 2020.

Dinesh Balachandran and Mohit Jain have been managing this fund since May 2018 and November 2017, respectively.

The scheme’s investment objective is to generate capital appreciation from a portfolio predominantly invested in equity and equity-related instruments, following a contrarian strategy.

Trailing returns

The fund has outperformed the benchmark (National Stock Exchange Nifty 500 TRI) and its peers (funds ranked under the value/contra category in the June 2023 CMFR) in the past one-, two-, three-, five-, seven-, and 10-year trailing periods.

To put this in perspective, the Rs 10,000 invested in the fund at its inception would have increased to Rs 1.71 lakh on October 12, 2023, at an annualised rate of 16.66 per cent. In contrast, the same investment in the category and benchmark would have grown to Rs 1.54 lakh (15.98 per cent) and Rs 1.24 lakh (14.67 per cent), respectively.

A systematic investment plan is a disciplined mode of investing offered by mutual funds through which one can invest a certain amount at regular intervals.

A monthly investment of Rs 10,000 for the past 10 years in the fund, totalling Rs 12 lakh, would have grown to Rs 31.41 lakh (or 18.46 per cent annualised return), compared with Rs 25.79 lakh (14.77 per cent) in the benchmark as of October 12, 2023.

Portfolio analysis

In the past three years, the fund has taken on a higher exposure to large and smallcap stocks and lower exposure to midcap stocks. Allocations to mid and smallcap stocks averaged 16.64 per cent and 27.46 per cent, respectively, while those to largecap stocks averaged 39.64 per cent.

The portfolio was diversified across 21 industries, with financial services dominating at an average allocation of 19.14 per cent, followed by capital goods (7.36 per cent), oil and gas (7.19 per cent), health care (6.86 per cent), and information technology (5.89 per cent).

In the period under analysis, the fund took exposure to 147 stocks and held 17 consistently.

Key contributing stocks to the portfolio were Tube Investments of India, ICICI Bank, Carborundum Universal, State Bank of India, and Prism Johnson.

- CRISIL Research