SBI Contra Fund or Nippon India Growth Fund

 

To determine which mutual fund, SBI Contra Fund or Nippon India Growth Fund, has performed better over the past 3 years, let's compare their 3-year returns and other relevant factors like risk levels, fund objectives, and category. Here's a general breakdown:

1. Performance Comparison (3-year Returns)

As of the latest data (up to 2024):

• SBI Contra Fund (Contra Category): The 3-year annualized return is approximately 26-28%.
• Nippon India Growth Fund (Mid-cap Category): The 3-year annualized return is around 24-26%.

2. Category and Objective

• SBI Contra Fund: This is a Contra Fund, meaning it invests in undervalued stocks or those not in favor, aiming for long-term gains as the market corrects. Contra funds can be riskier but may offer higher long-term returns.
• Nippon India Growth Fund: This is a Mid-cap Fund, focusing on mid-sized companies with growth potential. These funds often provide high returns but come with volatility, especially in uncertain markets.

3. Risk

• Both funds involve moderate to high risk, but the SBI Contra Fund might have slightly higher risk due to its contrarian investment strategy.
• Nippon India Growth Fund, being a mid-cap fund, can also experience sharp fluctuations but is more focused on companies with growth prospects.

Risk Comparison: SBI Contra Fund vs. Nippon India Growth Fund

When comparing the risk profiles of these two funds, we need to consider factors such as volatility, standard deviation, beta, and the category of the funds. Below is a detailed breakdown:

1. Risk Indicators

Metric	SBI Contra Fund	Nippon India Growth Fund
Standard Deviation	Higher (around 18-20%)	Moderate (around 16-18%)
Beta (Market Risk)	Higher (1.1 - 1.2)	Moderate (0.9 - 1.0)
Category	Contra (Value-based)	Mid-cap (Growth-based)
Sharpe Ratio (Risk-adjusted Returns)	Lower	Higher

• Standard Deviation: This measures how much the fund’s returns fluctuate compared to its average return. The SBI Contra Fund has a higher standard deviation, meaning its returns are more volatile.

• Beta: This measures the fund's sensitivity to market movements. A Beta of 1 means the fund moves in line with the market. The SBI Contra Fund has a slightly higher beta, making it more sensitive to market volatility than Nippon India Growth Fund.

• Sharpe Ratio: It measures risk-adjusted returns. A higher Sharpe ratio suggests better returns for each unit of risk taken. Nippon India Growth Fund often shows a slightly higher Sharpe ratio, meaning it may offer better returns for the risk it takes.

2. Category Risk

• SBI Contra Fund (Contra/Value Strategy): The fund focuses on undervalued companies or sectors that are out of favor. This contrarian strategy involves higher risk since the market may take time to recognize the value of these investments. However, if these bets succeed, the rewards can be substantial.

• Nippon India Growth Fund (Mid-cap Fund): This fund invests in mid-cap companies, which are generally more volatile than large-cap stocks but can provide high growth potential. Mid-cap funds are more sensitive to economic cycles, and their performance can swing based on market conditions.

3. Drawdown Analysis (Worst-case Scenario Loss)

• SBI Contra Fund: Historically, contra funds experience sharp drawdowns during market downturns, especially because they hold stocks that may not immediately recover with the market.

• Nippon India Growth Fund: Being a mid-cap fund, it is also prone to sharp corrections in bear markets, though it tends to recover better in bull phases.

Conclusion on Risk:

• SBI Contra Fund: Higher risk due to its contrarian strategy and higher volatility. Suitable for investors with a high-risk tolerance and a long-term horizon.
• Nippon India Growth Fund: Moderate risk compared to the contra strategy but still volatile due to its mid-cap exposure. Better suited for investors looking for growth with a slightly more moderate risk profile.

In summary:

• If you're willing to tolerate higher volatility and market sensitivity for potential long-term gains, SBI Contra Fund is riskier.
• Nippon India Growth Fund has more moderate risk but still offers strong growth potential due to its mid-cap focus.

Exit Loads for SBI Contra Fund and Nippon India Growth Fund

While mutual fund policies can change, as of the latest available information (up to 2024), here’s how exit loads typically apply to these funds:

1. SBI Contra Fund

• Type of Fund: Equity-Oriented (Contra Strategy)
• Exit Load Policy:
  • Redemption Within 1 Year: Generally, an exit load of 1% of the redemption amount is charged.
  • After 1 Year: No exit load is applicable.
  Example:
  • If you redeem ₹10,000 worth of units within a year, the exit load would be ₹100 (1% of ₹10,000), so you receive ₹9,900.

2. Nippon India Growth Fund

• Type of Fund: Equity-Oriented (Mid-Cap Focus)
• Exit Load Policy:
  • Redemption Within 1 Year: Typically, an exit load of 1% is charged.
  • After 1 Year: No exit load is applicable.
  Example:
• Redeeming ₹10,000 within a year incurs an exit load of ₹100, resulting in ₹9,900 received.

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