Value mutual funds have witnessed robust investor interest, garnering Rs 22,757 crore in inflows in 2024, nearly double the amount seen in 2023, fueled by impressive returns generated by the segment.
This surge reflects a shift in investor focus towards fundamentally strong yet undervalued stocks.
On average, value mutual funds delivered returns of over 21 per cent in 2024, with a nearly 20 per cent return over the past three years, the industry data showed.
Looking ahead to 2025, it is expected that value mutual funds will continue to capture attention, particularly amid global uncertainties, Trivesh D, COO of stock trading platform Tradejini, told PTI.
He highlighted that factors such as likely RBI rate cut and geopolitical shifts, including US policies, could shape investor sentiment.
In terms of inflows, the total amount into value mutual funds reached Rs 22,757 crore in 2024, a significant increase from Rs 11,927 crore in 2023, according to the Association of Mutual Funds in India (AMFI).
This influx of capital contributed to a 39 per cent rise in assets under management (AUM), which surged to Rs 1.88 lakh crore by December 2024, up from Rs 1.33 lakh crore in 2023.
Several prominent value funds, such as UTI Value Fund, Axis Value Fund, Quantum Long Term Equity Value Fund and ICICI Prudential Value Discovery Fund are available for investing.
These funds have given good returns in the last year.
Moreover, Mahindra Manulife Value Fund, which is launching its new fund offering (NFO) on February 7, may attract investor interest.
The fund is built on three core investment pillars -- quality companies, firms in recovery mode, and sectors poised for long-term growth.
It aims to create a diversified portfolio across various sectors and market capitalisations.
Santosh Joseph, Co-founder and CEO of Germinate Investor Services, noted that value mutual funds saw a notable surge in inflows, largely due to strong past performance and a resurgence in key sectors.
After a period of underperformance in 2022, value funds rebounded in 2023 and continued to deliver impressive returns in 2024.
This strong performance, coupled with markets reaching new highs, drew investors seeking undervalued sectors that were beginning to show substantial growth potential, he added.
The sectors that fueled the value fund rally in 2023 and 2024, including metals, real estate, construction, capital goods, PSUs, and manufacturing, are expected to remain robust, supported by government infrastructure spending and industrial expansion.
"Value investing has been in the spotlight over the past few years, and for good reason.
"Investors have realised that buying fundamentally strong stocks at lower valuations can be a smart way to build wealth over time," Feroze Azeez, deputy CEO of Anand Rathi Wealth Ltd, said.
This growing interest in value funds can also be attributed to their strong historical performance, as seen in indices like the Nifty 500 Value 50 Index, which recorded returns of 20 per cent in 2024, 62 per cent in 2023, 23 per cent in 2022, and 54 per cent in 2021.
Value stocks, typically undervalued at the time of purchase but with strong fundamentals and growth potential, are often contrasted with growth stocks, which focus on companies with significant future growth prospects.
Moreover, the mutual fund industry is seeing a shift in investor demographics.
Folios increased by 23.56 lakh to 80 lakh as of December 2024, indicating that long-term investors are gravitating toward stability amid an uncertain macroeconomic environment.
Additionally, younger investors, especially from Gen Z, are more inclined towards momentum stocks, seeking quick gains, while older investors (40-plus) are moving their funds into value investments, Trivesh said.
Experts suggest that investors who balance their portfolios across large-cap, mid-cap, and flexi-cap funds may be better positioned to navigate the evolving market landscape.
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