The Hindu Business Line : Contra funds: Gaining ground

CONTRA funds are set to become a complete genre in India, thanks to an increasing propensity of asset management companies to come up with these products.

The latter, sources say, are slowly gaining a firmer foothold in the market.

SBI MF was the first to launch such a scheme in July 1999, followed recently by Kotak Mahindra MF.

Tata MF's scheme is the third of its kind.

SBI Magnum Contra (with NAV of over Rs 20), which seeks to invest in undervalued and out-of-favour stocks, has provided 47 per cent over a five-year period (as on August 12). Its one-year performance is more impressive — 108 per cent. Some of its top holdings have been Zee, M&M, Bhel, Arvind Mills and Cipla.

Some sections are of the view that a contra fund may sometimes be constrained by liquidity, which may be restricted by trading volumes.

Reduced liquidity in the secondary market may have an adverse impact on market price and its ability to dispose of particular securities.

SBI Contra and Kotak Contra have assets under management of about Rs 425 crore and Rs 650 crore respectively.

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