About Value Funds
- Value mutual funds are a type of equity fund built with a value investing strategy. As per the norm, these funds have to invest at least 65% of their assets in equity-oriented securities. Fund managers of value funds identify and invest in undervalued stocks or stocks that trade at a discount. To appreciate the concept of value funds, let us first understand what value investing means.
- Sometimes the stock price is not the true indicator of the share’s worth. Having identified this, Benjamin Graham, known as the father of value investing, introduced this investment philosophy in his book, The Intelligent Investor, in 1949.
- Value investing means investing in stocks whose intrinsic value is higher than the prevailing market price. Since they are undervalued, value stocks have the potential to generate significant returns in the long term. The intrinsic value of the stock or the company is ascertained by considering its business model, financials, management team, competition, etc. Based on these studies, if a stock’s market value is less than its intrinsic value, it is considered a ‘value stock’.
How Do Value Funds Work?
Features of Value Mutual Funds
- Requires extensive research: Identifying value funds requires extensive market analysis and research. A value mutual fund that performs well in the market is usually managed by fund managers that have significant experience and awareness of the stock market and fundamental analysis of stocks.
- Long-term investments: Managers of a value fund invest in stocks that are undervalued due to certain conditions. Generally, these conditions may not have specific timelines to recover. Hence, it is important to stay invested in value funds for at least 5 years.
- Risk appetite: The risk level associated with value funds is high as they are equity funds. They are prone to market risks like any other equity mutual fund scheme. However, the downside risk is relatively lower in a bear market compared to other equity funds since the stock prices at the time of investing in these funds are already lower. And the fall in the bear market may not be as significant as others.
- Past performance: The past performance of a value fund does not guarantee similar performance in the future. However, it is still good to look at the historical returns. This gives you an idea of how the fund performed in various market cycles.
Advantages of Investing in Value Funds
- Diversification: You can diversify within value funds by investing across market capitalisations and industries.
- Higher returns: Since value funds invest in undervalued stocks with high potential to grow in the long run, they may generate a higher return in the long term.
- Strong fundamentals: Fund managers pick value stocks with good fundamentals, which strengthens your portfolio.
- High flexibility: A value fund can invest in stocks of any sector and market cap without limit. Therefore, fund managers have high flexibility in asset allocation to earn optimal returns based on the market analysis.
- Flexible investment options: As with mutual funds, value funds have lumpsum and SIP investment options.
- Comparatively lower downside risk: Compared to other equity funds, value funds may not suffer great losses due to market instability in a bear market. This is because the underlying stock would already have been trading at a discount, leaving less room for a further price drop.
Risks Involved in a Value Fund
- Like other equity mutual funds, value funds are highly risky. The NAV of a value is sensitive to market conditions.
- If the fund manager of a value fund is not well-experienced in picking value stocks, the fund may suffer losses
- Value funds may have associated costs like entry load, exit load, expense ratio, etc., decreasing your overall returns
Factors To Consider Before Investing in Value Mutual Funds
In case you are interested in the investment in mutual fund, you must consider a few factors that could affect your decision to invest. It is worth assessing the fund (or funds) you are considering regarding the value-oriented companies they may be investing in and the past performance of the fund (or funds). Here are some factors to keep in mind:
- Typically, when you wish to invest in any mutual fund, it is a good idea to do some background work on the mutual fund itself. If you are considering a specific value fund to invest in, you may want to evaluate the fund’s performance in the past. Generally, a fund’s track record over the previous 5 years may be considered before you invest.
- Consider your personal financial requirements and investment horizon before you think of value funds. As value-based funds may potentially rely on returns on equity due to the possible growth of companies, you may have to wait for long-term returns. Hence, if you have long-term perspectives, you may contemplate investment.
- While you are assessing the fund and companies whose stock it invests in, you may want to consider portfolio diversification. For instance, value funds may invest in particular companies or sectors you may or may not want exposure to. You may want to be exposed to certain funds offering you exposure to value companies only in sectors you are interested in for your own unique portfolio diversification requirements.
- Think about your own risk tolerance and investment behaviour. Before you invest in any mutual funds, this is one of the most crucial considerations. Since value funds invest a large portion of capital in equity, there may be a significant amount of risk involved, even if you are prepared for investment in the long term.
Who Should Invest in Value Funds?
- If finding value stocks is hard for you: Identifying the best value stocks is not a walk in the park. It requires experience in the market, analytical skills, and expertise. Therefore, if you find looking for value stocks to be tedious, you can directly invest in the best value mutual funds. This way, experts handpick value stocks and monitor the portfolio to optimise returns for you.
- If you have a high-risk appetite: Since value mutual funds are equity funds, they come with high risks and are prone to market volatility. Therefore, ensure that your risk profile aligns with the scheme's risk level.
- If you are a long-term investor: Value mutual funds are a suitable option for long-term investors. Consider these funds if you have an investment horizon of more than 5 years.
- If you are new to investing: If you are new to the market and lack the expertise to analyse stocks but want to benefit from investing in value stocks, you can consider these funds. In the long run, you would have accumulated significant returns from these.
Taxability of Value Funds
Since value funds are a type of equity fund; they have the same tax treatment. The following tax rules are applicable to the holder of value funds:
- Short-term Capital Gains (STCG): Gains on value fund units sold within a year of buying are taxed at 15% plus applicable cess.
- Long-term Capital Gains (LTCG): Gains up to Rs. 1 lakh per year on selling value fund units after a year of holding them are tax-free. Gains beyond this limit are taxed at 10% with no indexation benefit.
- Dividend tax: In addition to capital gains tax, you must also pay tax on dividend income, if any, generated by the value fund.
How To Invest in Value Funds?
Investing in the value Mutual Fund is hassle-free when done through your Angel One account. You just have to follow these simple steps: Step 1: Log in to your Angel One account. Note: In case you do not have an account with Angel One, you can open a demat account with us in under a few minutes by submitting the necessary documents.
Step 2: Determine a value fund that suits your needs and risk profile. You can learn more about each value fund on the Angel One app. Things to consider at this stage are:
- Search for the fund you want to invest in.
- Analyse the fund’s past performance, tax incidence, and the sectors and companies it invests in. You can also calculate the potential returns using the calculator.
- Evaluate the fund’s level of risk, its ratings and expense ratio.
Step 3: Once you finalise the value fund(s) you want to invest in, open your Angel One account, go to the Mutual Funds section, and look for it.
- Decide whether you want to invest via SIP or make a one-time investment
- Decide your monthly SIP date. Now, enter the amount you want to invest and choose the payment mode.
- After placing the order, you can create an AutoPay to make hassle-free future instalments in case of SIP investments.
Top 10 Value Funds to Invest in
| Name | AUM (₹ Cr) | 1 Yr Return (%) | 3 Yr Return (%) |
| Axis Value Fund | 1,374.94 | 15.23 | 24.68 |
| HSBC Value Fund | 14,552.40 | 18.34 | 24.32 |
| Nippon India Value Fund | 8,961.98 | 12.46 | 23.58 |
| Quant Value Fund | 1,565.24 | 9.39 | 22.16 |
| Aditya Birla SL Value Fund | 6,245.99 | 13.06 | 21.61 |
| DSP Value Fund | 1,413.64 | 18.48 | 21.43 |
| Tata Value Fund | 8,818.88 | 13.46 | 21.16 |
| HDFC Value Fund | 7,486.92 | 16.80 | 21.14 |
| ICICI Pru Value Fund | 60,352.77 | 13.74 | 21.11 |
| ITI Value Fund | 343.04 | 15.43 | 20.90 |
Note: The data above is as of Feb 16, 2026, and is sorted and ranked as per 3-year CAGR.
Axis Value Fund
Axis Value Fund aims to generate long-term capital appreciation by investing primarily in undervalued companies with strong fundamentals and turnaround potential across sectors. The scheme follows a value-investing approach, focusing on stocks trading below intrinsic value. The fund carries an expense ratio of 0.70%, and it is managed by Nitin Arora along with Krishnaa N under Axis Asset Management Company.
HSBC Value Fund
HSBC Value Fund seeks long-term capital growth by investing in fundamentally strong but undervalued companies across market capitalisations using a disciplined value-investing strategy. The fund has an expense ratio of 0.74% and is managed by Venugopal Manghat at HSBC Asset Management India.
Nippon India Value Fund
Nippon India Value Fund focuses on investing in value stocks with long-term appreciation potential while maintaining diversification across sectors and companies. The expense ratio stands at 1.08%, and the fund is managed by Dhrumil Shah and Meenakshi Dawar.
Quant Value Fund
Quant Value Fund aims to deliver long-term capital growth by investing in undervalued companies identified through data-driven and quantitative investment strategies. The fund carries an expense ratio of 0.58% and is managed by Sandeep Tandon, Ankit Pande, Varun Pattani and Ayusha Kumbhat.
Aditya Birla SL Value Fund
Aditya Birla SL Value Fund seeks capital appreciation by investing in fundamentally strong companies trading at attractive valuations across market segments. The fund has an expense ratio of 1.01% and is managed by Kunal Sangoi.
DSP Value Fund
DSP Value Fund invests in undervalued companies with strong earnings potential and sustainable business models to achieve long-term capital growth. The scheme carries an expense ratio of 0.95% and is managed by Aparna Karnik and Kaivalya Nadkarni.
Tata Value Fund
Tata Value Fund aims to generate capital appreciation by investing in companies available at reasonable valuations with improving business prospects across sectors. The expense ratio stands at 0.81%, and the fund is managed by Sonam Udasi at Tata Asset Management.
HDFC Value Fund
HDFC Value Fund focuses on investing in fundamentally sound companies available at attractive valuations, aiming for long-term wealth creation through value investing. The expense ratio is 0.99%, and the fund is managed by Anand Laddha at HDFC Asset Management Company.
ICICI Pru Value Fund
ICICI Pru Value Fund seeks long-term capital appreciation by investing in undervalued stocks with strong recovery and growth prospects. The expense ratio stands at 0.96%, and the fund is managed by Sankaran Naren, Dharmesh Kakkad and Masoomi Jhurmarvala.
ITI Value Fund
ITI Value Fund aims to provide long-term capital growth by investing in companies available at reasonable valuations across sectors through disciplined stock selection. The fund carries an expense ratio of 0.57% and is managed by Rohan Korde and Dhimant Shah.
