As markets correct on global cues related to the possibility of a recession in the US, escalating geopolitical tensions in the Middle East and action around the Japanese economy, it may be a good time to rid portfolios of frothy expensive holdings. 

For investors, it may be a good time to focus on value picks with renewed interest after the sharp run-up in the indices over the past year or so.

Nippon India Value fund, which has a track record of over 19 years since 2005, may be a suitable choice for investors looking at saving for long-term goals over at least 7-10 years.

With consistent and above-average performance over the years, the fund can be a reliable addition to the satellite portion of an investor’s portfolio.

Like any other investment style, value can also underperform for prolonged timeframes, but it can be rewarding when holding periods are stretched and investments are made via the SIP route.

Rewarding investments

Nippon India Value Fund’s record over the past decade places it among the most consistent performers across categories.

Over the past 1-year, 3-year, 5-year, and 10-year timeframes, the fund has delivered 48.8 per cent, 24.8 per cent, 26.6 per cent and 18.2 per cent, respectively on a point-to-point basis. This performance places it among the top few funds in the category. The scheme outperformed the Nifty 500 TRI by 3-6 percentage points over the medium to long term.

When five-year rolling returns from January 2013 to August 2024 are considered, Nippon India Value has delivered mean returns of 14.9 per cent.

Also, in the period mentioned above, on a 5-year rolling basis, the scheme has beaten its benchmark Nifty 500 TRI over 81 per cent of the time, which is quite healthy. It has delivered more than 12 per cent nearly 72 per cent of the time over this period and more than 15 per cent almost 55 per cent of the time.

The fund’s SIP returns (XIRR) over the past 10 years are fairly robust at 20.8 per cent. An SIP in its benchmark Nifty 500 TRI would have returned 17.4 per cent over the same period.

All return figures pertain to the direct plan of Nippon India Value fund.

The fund has an upside capture ratio of 113.6, indicating that its NAV rises much more than the benchmark during rallies. But more importantly, it has a downside capture ratio of 93.96, indicating that the scheme’s NAV falls less than the Nifty 500 TRI during corrections. A score of 100 indicates that a fund performs in line with its benchmark. This is based on data from August 2021 toAugust 2024.

Portfolio moves

Nippon India Value fund has always taken  a flexicap approach to stock selection. However, the portfolio has been bias has been towards large caps, with around 55-63 per cent being held in such stocks. Mid- and small-cap picks, too, figure prominently in the fund’s holdings. Small caps have, at times, accounted for over 20 per cent of the portfolio.

However, the fund manages risks by taking a highly diffused approach to stock and sector holdings. Individual stocks beyond the top 10 itself account for less than 2 per cent of the portfolio, and almost all sector exposures (barring banks) are kept at less than 10 per cent each.

True to its value style, banks have always been the top sector held in recent years. Large caps in the space, such as HDFC Bank and ICICI Bank, with valuation comfort, are among its main picks. Given that the software stocks have had a rather dull run over the past 2-3 years, the fund holds such stocks as its second-largest segment. Most of the holdings in these two segments are from the large-cap space.

Consumer durables and construction projects are other key sectors held in the fund portfolio.

The fund has avoided the temptation to heavily rely on the  frothy momentum-driven picks of the past few years, but has still managed  to outperform its benchmark and many other equity funds.

Nippon India Value fund remains mostly fully invested, and the cash position is usually around 2-4 per cent.

Overall, the fund is suitable for an investor with an above-average risk appetite and the ability to stay put long-term.

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