Good Returns: Everyone Wants The “Latest Launch”. But Does That Always Mean Better Value?

Think about smartphones.

Every year, a new flagship model launches with massive hype, flashy ads, and long waiting lists. Meanwhile, last year's premium model - which may still have strong performance, solid features, and reliable long-term usability - suddenly receives far less attention.

Not necessarily because it became "bad" overnight, but because the spotlight shifted elsewhere.
Something similar can happen in the stock market too.

At different points in time, investors may aggressively chase trending sectors, fast-moving themes, or popular stocks, while some fundamentally stable businesses quietly move out of focus. This is where value investing as a strategy often comes into discussion.

Value investing focuses on identifying companies that may be trading at relatively reasonable valuations compared to what some investors believe could be their long-term business potential.

What are Value Funds?

As per SEBI categorisation, Value Funds are equity mutual funds that follow a value investment strategy.

In simple terms, these funds invest mainly in stocks that the fund manager believes may currently be undervalued or temporarily underappreciated by the market.

These could include businesses with:

a. Stable earnings
b. Strong balance sheets
c. Established operations
d. Healthy cash flows
e. Lower valuations compared to peers

The idea is not necessarily to buy the "cheapest" stocks available, but to identify companies where market prices may not fully reflect underlying business fundamentals.

For investors looking to understand value investing in a simplified and engaging way, this explainer video breaks down the concept further:

Watch the Value Fund explainer video:

Why do some fundamentally strong companies trade at lower valuations?

Stock prices are influenced by several factors beyond just business performance.

For example:

a. Investor sentiment may favor trending sectors
b. Short-term earnings pressure may impact valuations
c. Global uncertainty may affect markets
d. Sector-wide slowdowns may drag down stock prices
e. Momentum-driven rallies may shift investor focus elsewhere
As a result, even companies with stable operations may sometimes trade at relatively lower valuations for a period of time.

How do Value Funds Identify Opportunities?

Value Funds are actively managed by professional fund managers.

This means fund managers research companies, analyse industries, evaluate financials, and study valuations before making investment decisions.

Some commonly tracked factors include:

a. Earnings growth
b. Debt levels
c. Cash flows
d. Industry outlook
e. Business quality
f. Valuation measures such as P/E and P/B ratios

For first-time investors, these ratios are simply tools that help compare a company's stock price with its earnings or assets.

The objective is to identify businesses where valuations appear relatively reasonable compared to long-term fundamentals.

Why are Value Funds often discussed during volatile markets?

During strong market rallies, valuations in certain segments of the market can rise sharply.

At such times, some investors start exploring companies that may appear comparatively reasonably valued instead of focusing only on high-momentum segments. This is one reason value-oriented investing often becomes a discussion point during volatile or expensive market phases.

However, like all equity mutual funds, Value Funds are also subject to market risks and short-term volatility.

Investors can also explore more educational content and insights around Value Funds here: Mutual Funds - Invest in Mutual Funds Online | ICICI Prudential MF

What should investors keep in mind?

Value investing may require patience

Stocks considered undervalued can remain out of favour for extended periods before market sentiment changes.

Equity investments carry risk

Since Value Funds invest predominantly in equities, their value can fluctuate depending on market conditions.

Different strategies perform differently

No single investment style performs the same way across every market cycle.

Investments should align with financial goals

Investors may consider their risk appetite, investment horizon, and diversification needs before investing.

Final thoughts

Value investing is one among several approaches used in equity investing. While the strategy focuses on identifying potentially undervalued opportunities, investment outcomes are influenced by market conditions, economic developments, and company-specific factors.

Before investing, individuals may consider consulting a financial advisor and evaluating their financial goals, risk appetite, and investment horizon.

I. Know Your Customer (KYC):

To invest in Mutual Funds, you will need to complete your Know Your Customer (KYC) requirements. You can do so by visiting any AMC branch or nearest Point of Service and submitting the completed KYC Form along with all the required self-attested documents. Individual investors would be required to submit the following documents:

• A recent passport sized Photograph
• A Proof of identity - A copy of your PAN card
• A Proof of Address - A copy of your Voter ID card, Passport or Driving License

If you are already KYC Verified and would like to update any of your information, you can submit a completed KYC Details Change Form with the required self-attested documents at your nearest AMC branch or Point of Service.

II. SEBI registered Mutual Funds:

We advise investors to make informed decisions and are cautioned to invest only with SEBI registered Mutual Funds. List of Registered Mutual Funds is available at https://www.sebi.gov.in/intermediaries.html

III. Complaint Redressal:

For any queries, complaints & grievance redressal you can reach out to us at [email protected] or call us on 1800222999. If you are unsatisfied with the resolution or wish to escalate the matter, you may write to Investor Service Officer at [email protected]. For this purpose, Mr. Rajen Kotak is the Investor Relations Officer of the Mutual Fund. He can be contacted at 2nd Floor, Block B-2, Nirlon Knowledge Park, Western Express Highway, Goregaon (East), Mumbai - 400 063. Tel No.:022-2685 2000, FAX No.: 022 -2686 8313.

In case the investor is not satisfied with the resolution given by AMC, he can approach SEBI by registering his complaint on SCORES (SEBI Complaints Redress System) through https://scores.sebi.gov.in

Further, investors may also lodge complaints through Online Dispute Resolution Portal ('ODR') Portal available at https://smartodr.in/login

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.