Nippon India Value Fund has a strong history of outperforming its benchmark while offering optimal risk-adjusted returns, making it a solid choice for long-term investment. As global markets experience corrections due to concerns over a possible U.S. recession, rising geopolitical tensions in the Middle East, and developments in Japan’s economy, investors may find it opportune to reassess their portfolios, particularly by trimming overpriced holdings. In this context, value investments become appealing, especially after the significant gains in indices over the past year.
For those with long-term financial goals spanning 7 to 10 years, Nippon India Value Fund, with its 19-year track record since its inception in 2005, presents itself as a worthwhile consideration. Its consistent and above-average returns over time make it a reliable addition to the satellite portion of an investor’s portfolio. Although the value investment style can sometimes underperform over extended periods, it has the potential for significant rewards, especially when approached with a long-term perspective and through systematic investment plans (SIPs).
Consistent Performance Over the Years Nippon India Value Fund has proven to be one of the most consistent performers across various timeframes. Over the past 1, 3, 5, and 10 years, the fund has delivered impressive returns of 48.8%, 24.8%, 26.6%, and 18.2%, respectively, on a point-to-point basis. These results place it among the top performers in its category, outperforming the Nifty 500 TRI by 3 to 6 percentage points over the medium to long term.
Analyzing the fund’s performance through five-year rolling returns from January 2013 to August 2024 reveals that Nippon India Value Fund has provided an average return of 14.9%. During this period, the fund outperformed its benchmark Nifty 500 TRI 81% of the time and delivered more than 12% returns nearly 72% of the time. Furthermore, it achieved over 15% returns 55% of the time.
The fund’s SIP returns (XIRR) over the past decade have been robust at 20.8%, compared to the 17.4% return of an SIP in the Nifty 500 TRI benchmark during the same period.
Nippon India Value Fund has demonstrated an upside capture ratio of 113.6, indicating that its NAV rises significantly more than the benchmark during market rallies. More importantly, it has a downside capture ratio of 93.96, showing that the fund’s NAV falls less than the Nifty 500 TRI during market corrections. An upside or downside capture ratio of 100 signifies that a fund performs in line with its benchmark. These figures are based on data from August 2021 to August 2024.
Portfolio Strategy Nippon India Value Fund adopts a flexicap approach, allowing it to invest across different market capitalizations. However, the portfolio leans towards large-cap stocks, typically holding 55-63% in such companies. Mid- and small-cap stocks also play a significant role in the portfolio, with small caps occasionally accounting for more than 20% of holdings.
The fund manages risk by maintaining a diversified approach to stock and sector allocation. Beyond the top 10 stocks, each holding typically represents less than 2% of the portfolio, and most sector exposures, except for banking, are kept below 10%. Consistent with its value-focused strategy, banks have remained the largest sector in the portfolio, with top picks like HDFC Bank and ICICI Bank due to their favorable valuations. The fund also holds software stocks as its second-largest sector, despite their lackluster performance in recent years.
Consumer durables and construction projects are other significant sectors within the portfolio. Notably, the fund has avoided overexposure to the high-momentum stocks that have been popular in recent years, yet it has still managed to outperform its benchmark and many other equity funds.
Nippon India Value Fund typically remains fully invested, maintaining a cash position of around 2-4%. Overall, this fund is well-suited for investors with a higher risk tolerance who are committed to a long-term investment strategy.