Value Funds

Value mutual funds are equity-based products that use a value investing strategy. The fund managers look for companies that are currently undervalued compared to their true worth and invest in them.

With companies trading below their true value, fund managers often invest in them due to short-term problems or market overreaction. They also examine the company's financial health, earnings potential, and growth prospects before investing.

In total (as of Oct 2025), there are around 25 value funds available in the market. This number can vary across time.

There are many different types of value mutual funds, and they are usually classified based on their investment focus. A few examples include:

• Multi-Cap Value Funds: They adopt a value strategy while investing in underpriced large, mid, and small cap stocks to diversify holdings across market capitalisation.
• Thematic or Sectoral Value Funds: Depending on market trends and opportunities, certain value funds may concentrate on affordable stocks in specific industries or sectors, such as energy, financial services, or industrials.
• Global Value fund: It includes global companies having a low Price-to-Equity (PE), Price-to-Book (PB), or those that are usually undervalued.

The SEBI (Securities Exchange Board of India) details that value mutual funds must put at least 65% of their assets into equity and equity-related products. And the rest resides in debt and other liquid investments.

To meet their specific (65%) value criteria, fund managers conduct extensive research to find equities trading below their true value. They then buy with a long-term view, hoping for appreciation when the market realizes how valuable these companies really are.

Value mutual funds are preferable for investors who strongly believe in the value investing philosophy of buying undervalued stocks.

You can invest in value funds if you:

• Have a Long-Term Horizon - These funds focus on undervalued stocks that may take time to realize their true potential. Investors with a 5+ year outlook can benefit the most.
• Looking to invest in undervalued stocks - If you prefer investing in fundamentally strong company stocks trading below their intrinsic value, then these funds can be your good friend.
• Can Handle Short-Term Fluctuations - These funds can suit if you can handle short-term volatility during bullish or speculative phases for better gains.
• Seek Portfolio Diversification - Those who already have exposure to growth or momentum funds and wish to see diversification.
• Have Patience and Research-Oriented Investors - Value investing rewards those who trust the fundamentals and are willing to stay invested despite short-term market noise.

Planning to invest in Value Funds online?

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Here's how you can invest in Value mutual funds in 4 easy steps:

Before investing in value mutual funds, consider the following factors:

• Investment Horizon: These value-added funds take time to yield and, therefore, are ideal investments for 5+ years.
• Your Risk Tolerance level: Before investing, ensure your risk-bearing capacity is more than minimal since these funds may underperform during specific market cycles.
• Fund Performance: Review the fund's historical performance across different market conditions to see its survival rate in each volatility cycle.
• Expense Ratio: Here, the fee charged by fund houses for managing your investments can also influence your net yield. A lower expense ratio means their costs remain low, indicating higher proceeds.
• Fund Manager's Experience: The experience of the fund managers can also help to manage and enhance the portfolio in tough markets.

Taxation for value mutual funds in India is as follows:

• Short-Term Capital Gains (STCG): If units are sold within 12 months, gains are taxed at 20%.
• Long-Term Capital Gains (LTCG): For units held longer than 12 months, gains up to ₹1.25 lakh are tax-exempt. The rest of the balance has an LTCG of 12.5%.
• Dividends: Applicable at individual slab rate.