What are contra mutual fund schemes?

1. Contra funds are equity mutual funds that take a contrarian view on the market.

2. Underperforming stocks and sectors are picked at low price points with a view that they will perform in the long run.

3. The portfolios of contra funds have defensive and beaten down stocks that have given negative returns during bear markets.


4. These funds carry the risk of getting calls wrong as catching a trend before the herd is not possible in every market cycle and these funds typically underperform in a bull market.

5. As per the Sebi recategorisation of mutual funds, a fund house can either offer a contra fund or a value fund, not both.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)