The market has been volatile for quite some time now and benchmark index Nifty50 is down 16 percent from its peak in September 2025. Sensex 30 now trades around 20.7 price/equity (PE) and Nifty50 is around the same level too.
Thanks to the market correction, several stocks are seen to be available at discounted prices. This brings to the need to invest in value mutual funds which are seen to hold a lot of potential in future.
For the uninitiated, value funds refer to the schemes which follow value investment strategy with at least 65 percent assets invested in stocks.
Two types of value funds
Value mutual funds refer to the type of mutual fund which invest in stocks that are undervalued by the market. These have the potential to grow in future years but are hidden gems.
They are broadly divided into two categoreies: strategy and style-based. Equity funds may be categorised based on the valuation parameters adopted in stock selection, such as growth funds which identify momentum stocks that are expected to perform better than the market.
Additionally, there are value funds which identify stocks that are currently undervalued but are expected to perform well over time as the value is unlocked.
There are a total of 23 value funds with total AUM of ₹1.83 lakh crore, shows the AMFI (Association of Mutual Funds in India) data as on Jan 31, 2025.
Should you invest in value funds?
Experts believe that this is the good time to invest in value funds because of the right valuation available. However, it is important that the scheme is primarily invested in large cap and not small caps.
“These funds primarily invest in the PSU funds. Growth funds have not done well in past one year. At this juncture, value and growth funds are down. However, investors should be mindful of the fact that those schemes which have invested heavily into small caps should be avoided,” says Sridharan S, founder of Wealth Ladder Management.
“For instance, ICICI Value fund has 77 percent in large cap and only 4 percent in small caps. Any value fund which has invested more than 60 percent in large cap can be invested into,” he adds.
Current market condition favourable
Preeti Zende, founder of Apna Dhan Financial Services believes that the current market situation is best suited to invest in value funds.
“Fund managers of such fund value mutual funds try to find such stocks that are available at very attractive prices and going forward with their good growth the stock price increases which results in a good increase in the fund’s NAV. The current condition of the market is favourable to the value of mutual funds where you can park some money right now and when the market turns up there can be a good profit,” says Ms Zende.
However, she cautions that such mutual funds can be part of your satellite portfolio and the core portfolio which is mapped to your financial goal for this use diversified mutual funds for better risk management and decent return in future.
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Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
