Complete Guide of Best Contra Mutual Funds in India 2025
The knowledge of the best contra mutual funds in 2025 is also paramount to smart investors who have the intention to diversify their portfolio and benefit through value investing practices. Equity mutual funds with a special category known as contra funds have continuously gained popularization in the Indian market by providing returns through contrarian bets. It is a full-fledged guide explaining the best contra funds to invest in 2025, their characteristics, advantages, and pitfalls, and all you should know to make the correct investment decision.
What Are Contra Mutual Funds? How Do They Work?
Contra mutual funds in India are investments in shares or industries that are unpopular at the present time but have a good future growth. The fund managers examine the market sentiment and go against the tide by picking stocks that have been undervalued or overlooked and hoping that they will rebound. The contrarian investment strategy is aimed at producing greater returns in the long run than the other actively managed equity funds.
Key Features of Contra Funds
- Follow a contrarian investment approach - invest when the majority is selling.
- Usually make investments in underpriced stocks, battered areas, or cycle firms.
- Intend to perform better returns in case of market sentiment change.
- May are slow in realizing gains as compared to growth or momentum funds.
Pros
- Potential high long-term estimated capital gain.
- Minimizes the risk of investment in hot stocks.
- Valuing discipline and patience in investing.
Cons
- Weakness under the bullish or trending markets.
- Short term volatile returns.
- Requires investor patience.
What Are the Reasons behind Investor Selections in Contra Mutual Funds?
Numerous experienced investors choose contra funds to diversify their portfolio because such schemes do not act in a similar way to the available growth or bluechip funds. In the event of overvalued popular stocks, contra funds will find value in ignored regions, potentially providing protection in corrections. This has become even more important in the year 2025 when the world is quite volatile in the market with economic changes.
Did You Know?
As several market pundits have put it, contra funds have been doing well during market recovery as well as value rotation periods.
Abrupt Comparison - Major Contra Mutual Funds in 2025
The following is a brief comparison of the top performing contras mutual funds according to 3 years returns, assets under management, and expense ratio:
| Fund Name | AUM (Cr) | 3 yr CAGR (%) | Expense Ratio (%) |
|---|---|---|---|
| SBI Contra Fund | 17,600 | 23.8 | 0.95 |
| Invesco India Contra Fund | 8,200 | 21.6 | 1.08 |
| Kotak India EQ Contra Fund | 4,900 | 22.1 | 0.74 |
| Taurus Discovery Fund | 425 | 18.3 | 2.27 |
Data as per March 2025 factsheets. Direct plans considered.
What Is the Best Contra Mutual Fund in 2025? What Makes It Stand Out?
SBI Contra Fund - The Most Popular Contra Fund in India
SBI Contra Fund has always been the leader in the contra line due to its disciplined contrarian investment style and a large and diversified corpus. In 2025, investors returned to this fund which was managed by reputable managers and further performance.
SBI Contra Fund Highlights
- Long-term history of track record with 3 year CAGR of 23.8 percent.
- Invests in value stocks, cyclical companies and some growth plays.
- Good risk management and well diversified portfolio.
- Sound investor communication and transparency.
Pros
- Relatively reduced cost of doing business with peers.
- Stable investment team.
- Favorable risk adjusted returns.
Cons
- During bull rallies, short term returns can be lagging.
- Not appropriate in cases of quick gains.
What Other Contra Funds Are Doing Well in 2025?
SBI Contra takes the lead, but such funds as Invesco India Contra and Kotak India EQ Contra are also gaining great popularity, as they possess good returns and efficient investment procedures. Funds are somewhat varied in route, in the way of industry holdings and midcap exposure.
Invesco India Contra Fund - Midcap Value Focus
Sound judgments on midcap stocks and timely rebalancing remain effective in earning the trust of investors to this fund. Its 3-year cumulative returns are at 21.6 percent.
Key Features
- Agile strategy that reviews portfolios at regular intervals.
- Obese in new industry trends.
Kotak India EQ Contra Fund - Large Mid Cap Blend
The persona of the contra fund by Kotak is a balanced strategy with effective stock selection both in big cap and mid cap. It is a great asset in the number of people who are cost-conscious since it has a low expense ratio (0.74 percent).
Experts’ Insight
According to analysts, investors ought to consider a minimum of 5 years horizon in the cases of investing in contras when they are investing in a contra fund since the cycles of these funds may be longer than standard equity funds.
What Are the Key Advantages of Investing in Contra Funds?
Contra funds provide the possibility to gain when the cyclical recoveries and corrections take place, which might not be reflected by ordinary growth funds. Where trends in such a market as India have the ability to change rapidly, then having a contrarian angle may be helpful.
Advantages
- Bubble protection in the market and recessions.
- Is able to increase long term portfolio returns.
- Promotes speculation-free research based investing.
Risks
- The risk of poor performance may occur on long bull runs.
- Skill and timing of fund manager depend.
What Is to Be Considered Before Investing in Contra Mutual Funds?
- Investment Horizon: Best applicable of a minimum of 5 years or above.
- Risk Appetite: Suitable to those investors that can stand volatility.
- Expectations of Returns: Plan in times of poor performance during bull market periods.
- Selection of Funds: It is better to consider funds whose history is good and fund management is stable.
People Also Ask
Q: Is a contrabull market with contrafunds going to work in 2025?
A: Contra funds do not tend to perform well during continuous bull markets, however, it tends to serve as a diversifier and value addition during corrections.
Q: What is the difference between Contra Funds and Value Funds and other Equity Funds?
Although contras and value funds concentrate on undervalued stocks, contra funds take it a step further by aggressively targeting stocks or industries that are being shunned by most players in the market. This is contrarian thinking at a more profound level.
| Characteristic | Contra Funds | Value Funds | Growth Funds |
|---|---|---|---|
| Stock Selection | Out of favour stocks | Generally undervalued stocks | High growth potential stocks |
| Strategy | Contrarian | Value investing | Momentum investing |
| Examples in 2025 | SBI Contra, Invesco | HDFC Value, ICICI Pru Value | SBI Bluechip, Axis Growth |
| Volatility | High | Medium | Medium-High |
Q: Do contra fund and value fund differ in terms of riskiness?
A: Contra funds may be riskier because they may be investing in more neglected or battered areas but can be having greater reward potential in recoveries.
Did You Know?
Contrarian strategies have historically produced large alpha that value investing produces when the strategy returns to popularity following protracted growth periods.
How Is the Taxation of Contra Mutual Funds in India?
- Short-Term Capital Gains (STCG): Tax is based on 15 percent in case units are redeemed within 12 months.
- Long-Term Capital Gains (LTCG): Gains over 1 lakh per annum are subject to tax at 10 percent provided that they are held above a year.
- Dividend Taxation: All the dividend received is added to the income of the investor and falls under the slab rate.
Who Are the Investors of Contra Funds?
Contra mutual funds are used inappropriate for:
Ideal For
- Long term shareholders who want to make higher returns through calculated risks.
- Patient investors able to read the business cycles.
- Individuals intending to diversify portfolio and hedge against market trends.
Not Ideal For
- Short-term traders.
- Low risk investors.
- Individuals anticipating annual returns.
How To Choose the Best Contra Mutual Fund to Add to Your Portfolio in 2025?
Check when short listing contra funds:
- Based on several bull and bear cycles.
- Portfolio turnover ratio and investment strategy consistency.
- Experience and experience of fund management team.
- Current expense ratio and asset base of economies of scale.
- Sector and market cap allocations - favor funds that are diversified in nature.
People Also Ask
Q: Which one is better to invest in contra funds, SIP or lump sum?
A: Systematic Investment Plan (SIP) is adviced to average short term market fluctuations particularly the volatile ones such as contra.
Experts’ Insight
Numerous wealth advisors recommend allocation of an equity portfolio of 10 to 20 percent to a balance and alpha-distributed contra or value fund.
Case Study: Contra Funds 2022 to 2025 Performance in Reality
One point of example is SBI Contra fund. It increased its NAV by approximately 170 to more than 312 between April 2022 and March 2025. This translates to annualised returns of about 23.8 percent, which is way above beaten by the Nifty 500 TRI (benchmark) of more than 450 basis points in the same period. Rebalancing and aggressive contrarian sector calls (e.g. in PSU banks and IT) contributed to this performance.
Key Learning
- Contra calls are most likely to pay off once market cycles reverse.
- Patience and disciplined SIP contributed to a full benefit of investors.
TLDR / Quick Recap
- The Contra mutual funds are funds that are used to invest against the market and on neglected or under-valued stocks.
- SBI contra fund, Invesco India contra fund, and Kotak India EQ contra fund are the best contra funds in the year 2025.
- Contra funds are also suitable to patient investors with a minimum five year horizon, and they might provide better returns but have excessive risk and volatility.
- Before investing in a fund, always verify the fund history, fund manager, fund sectors and returns.
- SIP route and diversified allocation suggested to obtain the best results.
People Also Ask - FAQs
Q: What is the most suitable contra mutual fund in India in 2025?
SBI Contra Fund is the most popular and best performing contra fund in 2025 according to the AUM, returns and pedigree of fund manager.
Q: What is the relative safety of the contra mutual funds?
Contra funds are above average risk because they are undertaking an investment in stocks and sectors that are out of favour but it is less risky than investing in the stock in isolation.
Q: What is the minimum horizon of the contra mutual funds?
Contrarian stock picks should be held at least 5 years by investors to realize any significant returns.
Q: Are NRIs allowed to make investments in Indian contra mutual funds?
Yes, NRIs are allowed to invest in majority of the contra mutual funds in India via NRE or NRO accounts, but not restricted countries.
Q: What shall be the frequency of my reviewing of my investments on contra funds?
Look at your investments in a contra fund at least once a year with an emphasis on sticking to strategy and relative performance.
Sources
- SBI Mutual Fund Authoritative Site.
- Best Contra Funds 2025 Value Research Online.
- SEBI Contrarian Funds Guidelines 2025.
