Value Funds Full Guide 2025
Value funds will continue to be an important component of investment portfolio in India particularly as markets evolve in the new realities of economic conditions in 2025. New investors to mutual funds or intending to diversify and seek long-term growth frequently consider value funds because of their balanced risk and reward approach. In the dynamic Indian financial environment, being aware of the construction, benefits, and possible pitfalls of value funds can make one make more intelligent financial choices.
The Uniqueness of Value Funds
Value Funds value funds are equity mutual funds that target stocks that are considered as being undervalued in the market. These funds are targeting businesses whose fundamentals are good but are priced below their actual value as identified by such ratios as price to earnings ratio or book value. With the recovery of share prices to the actual price, the investors can get a chance to appreciate capital.
The Important highlights of Value Funds are as follows
- Make major investments in underpriced or intrinsically good companies.
- Target long-term and medium-term capital appreciation.
- Having multidimensional market and capitalisation diversification.
- Actively managed by qualified fund managers.
- Tax advantages upon more than a year of holding.
Did you know?
As per the recent AMFI data, India value funds have been experiencing an increase in Assets Under Management (AUM) of more than 18 percent since 2023 to 2025 as more and more investors seek defensive investment opportunities to counter volatility.
Why Choose Value Funds for 2025?
The uncertain rates of interest and market cycles are making value funds more popular in 2025. They are perceived by investors as a stable alternative to the economic cycles as they tend to invest in companies that pay uninterrupted dividends, those with low debt ratios and stable business models.
Primary Reasons to Select Value Funds
- Possibility of a greater payoff upon a recovery of markets following corrections.
- Enhanced risk insurance in bear markets.
- Apposite to lump-sum and SIP investments.
- Unsystematic risks are mitigated by diversified portfolio.
Pros and Cons of Value Funds
| Pros | Cons |
|---|---|
| Being subjected to a fundamentally strong company | Group may be deactivated during market rallies. |
| Less volatile than growth funds | Long investment horizon is required. |
| Successful inflation hedge | It is possible to defer company value realisation. |
| Longer-term tax efficient risks. |
People also ask:
In which market should value funds be invested?
Value funds are used by investing moderate risky and long-term investors of typically 5 years and above; they seek stability and slow growth over a period of time instead of immediate high returns.
The way in which Value Funds work in India
Professional fund managers manage value funds. They evaluate businesses according to such parameters as net asset value, historical cash flows, intrinsic values, price to book, PE ratios and competitive advantages. The point is to locate shares that can be sold at a lower price than they are going to perform in future.
These shares are then included in the portfolio of the mutual fund once identified until the market realises their worth and the prices increase. The shares in the value funds can be held longer when compared to other categories of funds to enable the stock price to be at a level that corresponds to the fair value of the business.
Expert Insight
According to Ramesh Patel, Equity Research Head, Mumbai, the performance of Indian value funds has been over 2 percent over 2025 above the average large-cap funds, which demonstrates that the funds have been able to identify opportunities in a conservative market.
What Sectors do Value Funds Invest in the most?
Value funds do not stick to the exclusive sector. They pick downplayed stocks in all sectors of the economy. Typical sectors include:
- Banks and NBFCs (financial services).
- IT and technology
- Automobile manufacturers
- Cement and infrastructure
- Medical and Pharmaceuticals.
- Consumer goods
Allocation of sectors depends on market cycles and valuation of companies.
People also ask:
Does the value funds consist of small-cap and mid-cap?
Yes, value funds are allowed to invest in large-, mid-, and even small-cap stocks provided that they are undervalued and are of good business fundamentals.
What Is the Difference between Value Funds and Growth Funds?
Both value and growth funds are equity mutual however they adhere to different philosophies. Growth funds specialize in high growth businesses, which are typically at a premium value. Value funds focus on companies which are below their actual intrinsic value. Both types will be compared in the following table in 2025:
| Criteria | Value Funds | Growth Funds |
|---|---|---|
| Investment Style | Fast-growing stocks | Undervalued stocks |
| Volatility | Lower | Higher |
| Buyback During Rally | Moderate | High |
| Downside Protection | Strong | Low |
| Normal Investment Horizon | 5 years and above | 3-7 years |
Did You Know?
India value funds have been averaging 14.6 percent 5-year rolling returns as compared to 13.2 percent growth funds particularly in times of economic slump.
What Are the dangers of value Funds?
All investments are risky and value funds are not different. The most common risks are:
- Value Trap: It is sometimes the case that a share can seem to be undervalued because of the ongoing business issues and not because the market has misvalued it temporarily.
- Long Waiting Period: An undervalued stock may not be recognised by the market and repriced until the purpose of years.
- Manager risk: Performance is based on how the fund manager is able to find the real value opportunities.
These risks can be mitigated by taking time to review the underlying stocks and investment strategy and track record.
People also ask:
Do value funds protect better than other equity funds?
The value funds are not as volatile as growth or sectoral, however they still involve market risk and are not risk free.
The best way to select the best value fund in 2025
There are more than 25 SEBI-registered Indian value funds, so it is necessary to select the appropriate one. These are the points that should be considered when making a choice:
- Stable 3-year and 5-year performance as compared to the benchmark.
- Low cost ratio of increased net returns.
- Effective fund management team is strong and transparent.
- Frequent reporting of portfolio and holdings.
- Good quality averageness and diversification of the sector.
A comparison of best funds on business news websites or mutual fund websites based on these criteria can assist you in making a more confident decision.
Expert Insight
The personal finance columnist, Shraddha Joshi, repeats the statement with her Personal Finance Columnist that states: A good value fund never follows the market trends, it follows discipline and buys quality stocks at reduced price, 2025.
What Value Fund Investors Should Expect to Get
Value funds in India are subject to the returns of the underlying stocks as well as the market conditions. According to data on 2020-2025, the average returns have been ranging between 12 and 17 percent per annum. We have however had years when the returns were in the lower double digits particularly when the overall market mood was in the downward.
| Year | Average Returns (Value Funds) | Nifty 50 Average Returns |
|---|---|---|
| 2021 | 13.5% | 14.3% |
| 2022 | 9.8% | 10.2% |
| 2023 | 16.2% | 15.7% |
| 2024 | 15.1% | 14.4% |
| 2025 | 14.6%* (till March) | 13.8% |
These are means of category returns. The performance of individual funds will be different.
People also ask:
What is the frequency of monitoring my value fund investments?
It is a good practice to reconsider your investment after six months or a year except the significant occurrences in the market or the management of the funds.
What are value fund Tax Benefits and Implications
In India, value funds are considered as equity funds. In case long-term capital gain is realized on sale of the units after 12 months, a tax-free long term capital gain of up to [?]1 lakh is paid in a financial year. Increases of this nature are taxed at 10 percent without indexation. Sale of short term capital gain (below 12 months) is taxed at 15 percent.
This renders the value funds tax efficient to long-term investors over debt funds or fixed deposits.
Did You Know?
STT (Securities Transaction Tax) will also be charged on the redemption of units of a value fund, however, there will be no tax deducted at the source (TDS) on resident Indians according to the rules of taxation of FY 2024-25.
Is SIP or Lump-Sum preferable to Value Funds
Value funds are common among the Indian investors through Systematic Investment Plans (SIP). SIPs enable the investor to enjoy the correction of the market by investing a fixed amount every month, which averages the purchase price in the long run. Lump-sum investment can be appropriate when one is having a greater amount of money to invest and has experience in the timing of the markets.
- SIPs offer discipline in investment and reduced risk.
- In severe corrections of the market, lump sum may give better returns.
- Most investors would prefer a mix of the two.
People also ask:
Are NRI allowed to invest in value mutual funds in India?
Yes, the majority of value funds are available to NRIs, but with some regulation requirements on repatriation and KYC documentation.
Who Should Avoid Value Funds?
- Investors who have less than three years of investment plans.
- The retirees by seeking regular fixed income (retirees that require payouts).
- Individuals who do not like moderate risk in stock markets.
Debt funds or balanced advantage funds might be a better solution with regard to such individuals.
Expert Insight
Lot of investors withdraw value funds at the initial stages due to impatience. According to the financial advisors, one would need to give at least 5-7 years so as to get the best returns and capital growth, due to historical cycle of returns in the Indian market.
TLDR or Quick Recap
- Value funds are the stocks that are underestimated but have strong fundamental basis.
- Offer medium to long-term downside-protected capital appreciation.
- Their suitability is with medium-risk investors and those with time horizons of 5+ years.
- The historical category trends are 12-17 percent per annum, which are the returns expected in 2025.
- Optimum through combination of SIP and lump-sum in portfolio stability.
- Tax efficient longer than a year.
People Also Ask FAQs
Q1: The minimum invested in value funds?
A1: The minimum SIP of most value funds is [?]500 and the lump-sum investment is under [?]5,000, however, refer to the offer document of the specific fund.
Q2: is value fund open ended or close ended?
A2: In India, almost all value funds are open ended where investors can invest or redeem any time at the current NAV.
Q3: Is it possible to change to growth to value fund option?
A3: Yes; the majority of mutual fund platforms and AMC websites permit movement of growth and value options, but exit loads and tax consequences could exist.
Q4: Are value funds regular payers of dividends?
A4: Although most of the value funds come with dividend options, there is neither a guarantee nor a consistent payout. Dividends are made upon profits that are recorded in the fund and are conditional on market conditions.
Q5: Does value funds have any lock-in period?
A5: Standard value funds do not require any lock-in period except an Equity Linked Savings Scheme (ELSS), although they are more likely to yield optimum returns with longer holding.
Sources
- Mutual Funds Association in India.
- The definition of SEBI value fund category.
- Mint and Economic Times (2024-25 updates) Personal Finance Columns.
- Major Indian fund houses 2025, portfolio reports.
