What is a Value Fund? Meaning, Benefits & How It Works
Value mutual funds invest in companies whose shares trade below their intrinsic value. These are open-ended equity schemes that adhere to the concept of value investing. The focus stays on businesses that seem underpriced in the market. Many investors choose such funds because the stocks often recover over time and can offer substantial long-term gains.
Value mutual funds and contra funds follow different ideas. Contra funds seek out companies that the market has overlooked for a while. Value mutual funds seek shares that are selling for less than their intrinsic value. This article will cover the well-known value mutual funds as of 2025 along with their taxation, benefits, risks and factors to consider while investing in these mutual funds.
Top 10 Value Funds in 2025
Here are the top 10 value funds sorted according to 5Y CAGR:
| Name | AUM | CAGR 3Y | Expense Ratio | Exit Load | NAV | Alpha | Volatility | CAGR 5Y |
|---|---|---|---|---|---|---|---|---|
| ICICI Pru Value Fund | 55445 | 23 | 1 | 1 | 529 | 7 | 11 | 27 |
| HSBC Value Fund | 13712 | 26 | 1 | 1 | 125 | 9 | 16 | 27 |
| Bandhan Value Fund | 9942 | 19 | 1 | 1 | 170 | 6 | 13 | 29 |
| UTI Value Fund | 9727 | 20 | 1 | 1 | 189 | 7 | 13 | 23 |
| Nippon India Value Fund | 8791 | 24 | 1 | 1 | 254 | 8 | 15 | 27 |
| Tata Value Fund | 8530 | 22 | 1 | 1 | 401 | 7 | 15 | 22 |
| HDFC Value Fund | 7267 | 21 | 1 | 1 | 848 | 8 | 13 | 24 |
| Aditya Birla SL Value Fund | 6033 | 21 | 1 | 1 | 140 | 7 | 17 | 24 |
| Templeton India Value Fund | 2198 | 20 | 1 | 1 | 803 | 5 | 12 | 29 |
| Quant Value Fund | 1690 | 24 | 0 | 1 | 21 | 7 | 17 | 0 |
Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.
Note: The data on the list of the best value mutual funds is from 20th October 2025. This data is derived from the Tickertape Mutual Funds Screener.
- Plan: Growth
- Category: Equity > Value Fund
- 5Y CAGR: Sorted from Highest to Lowest
Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Overview of the Value Mutual Funds in India based on AUM
ICICI Pru Value Fund
ICICI Pru Value Fund invests in undervalued stocks with strong fundamentals and aims for long-term capital growth. The fund uses a disciplined value-investing method to find opportunities in mispriced companies.
HSBC Value Fund
HSBC Value Fund focuses on identifying undervalued equities that have growth potential. It aims to create long-term returns by holding a diversified portfolio of quality companies trading below their real value.
Bandhan Value Fund
Bandhan Value Fund uses a value-investing approach to target companies available at attractive valuations. It aims for steady long-term growth by selecting stocks with strong fundamentals and short-term market mispricing.
UTI Value Fund
UTI Value Fund follows a disciplined value-investing strategy and selects sound companies trading below their fair value. It aims to build long-term wealth through patient and consistent capital allocation.
Nippon India Value Fund
Nippon India Value Fund invests in undervalued companies across different sectors with a focus on long-term capital growth. The fund takes advantage of market inefficiencies to find strong growth opportunities.
Tata Value Fund
Tata Value Fund uses a bottom-up investment approach to identify strong yet undervalued companies. It aims for steady wealth creation through disciplined and research-based investing.
HDFC Value Fund
HDFC Value Fund seeks long-term capital appreciation by investing in companies trading below their actual worth. It combines detailed research and value principles to build a balanced equity portfolio.
Aditya Birla SL Value Fund
Aditya Birla SL Value Fund invests in quality businesses undervalued by the market and aims for long-term wealth generation. The fund follows a disciplined process to capture potential re-rating opportunities.
Templeton India Value Fund
Templeton India Value Fund applies a classic value-investing approach by choosing companies with strong balance sheets and attractive valuations. It aims to achieve consistent long-term growth.
Quant Value Fund
Quant Value Fund follows a data-driven and rule-based value-investing model. It identifies undervalued companies with strong fundamentals and growth prospects to maximise long-term capital appreciation.
What is a Value Fund?
A value fund invests in companies that appear undervalued but have potential to grow over the years. Fund managers buy stocks that cost less than what they are truly worth. This way of investing aims to create better value fund returns for investors. These stocks often belong to indexes such as NIFTY Value. They usually give steady dividends, which makes them appealing to people who prefer stable long-term returns.
Taxability of Value Mutual Funds
Value mutual funds are treated as equity-oriented mutual funds because they typically invest more than 65% of their portfolio in equities. The tax treatment is aligned with that of other equity mutual funds under the Union Budget 2024–25.
| Type of Gain | Tax Rate | Exemption Limit | Applicable Holding Period |
| Short-Term Capital Gains (STCG) | 20% | Nil | Less than 12 months |
| Long-Term Capital Gains (LTCG) | 12.50% | ₹1.25 lakh per financial year | 12 months or more |
| Dividends (DDT/TDS) | 10% TDS | ₹5,000 (threshold per AMC) | Applicable on dividend income |
How to Invest in Value Mutual Funds?
You can easily start to invest in value mutual funds by following these steps:
- To invest in the best value mutual funds, you can visit a mutual fund investment platform such as smallcase.
- The next step is to research and identify the value mutual funds that match your financial goals. Tools like the Tickertape Mutual Fund Screener can help you filter and compare funds based on parameters such as returns, expense ratio, and fund size.
- Once you shortlist the funds, visit smallcase, log in, and search for the fund by name. You can then choose the investment mode, either a one-time lump sum or a value mutual fund SIP, and complete the process.
How do Value Mutual Funds Work?
- Investment Philosophy: Value mutual funds follow the value investing approach, where fund managers identify companies trading below their intrinsic value but possessing strong fundamentals and long-term potential.
- Stock Selection: Fund managers use financial metrics like P/E ratio, P/B ratio, and ROE to find undervalued stocks that are temporarily overlooked or underpriced by the market.
- Market Correction Benefit: As market conditions improve, these undervalued stocks tend to gain recognition, leading to capital appreciation and improved value fund performance over time.
- Long-Term Focus: Value mutual funds are designed for long-term investors, as the revaluation of undervalued stocks may take time, requiring patience and discipline to gain value fund returns.
- Risk and Reward Balance: These funds provide a balance between risk and reward by investing in established companies with solid earnings potential, reducing downside risk during market volatility.
- Objective: The primary goal of value mutual funds is wealth creation through disciplined investing in quality businesses available at attractive valuations, offering both stability and growth potential.
Benefits of Investing in Value Mutual Funds
Here are a few benefits of investing in value mutual funds:
- Diversified Portfolio: Value funds offer exposure to various investment options across different market segments, fostering portfolio diversification.
- Long-Term Growth Potential: By targeting undervalued stocks, these funds aim to generate higher value fund returns over the long term, minimising susceptibility to market fluctuations.
- Fundamental Strength: Investments within value funds typically possess strong fundamentals, increasing the likelihood of yielding steady, higher returns.
- Flexibility in Asset Selection: Fund managers can select assets based on market analysis, providing flexibility in value fund portfolio management.
- Suitable for Beginners: Value funds offer accessible investment options with potential for growth, making them ideal for novice investors or those with limited financial knowledge.
- Investment Options: Investors can choose between direct or regular plans, with the added benefit of Systematic Investment Plans (SIP) for consistent monthly investments or lump sum options.
Risks of Investing in Value Mutual Funds
When selecting the best value mutual funds for 2025, consider the following risks:
- Delayed Stock Price Discovery: Stock price discovery may take longer than expected in value investing strategies.
- Extended Turnaround Periods: Low-price stocks chosen by fund managers may take several years to turn around.
- Unpredictable Short-Term Movements: Some stocks may multiply rapidly in the short term, complicating predictions.
- Possible Underperformance: Value stocks may underperform compared to estimations, potentially impacting investment portfolios.
Factors to Consider While Investing in Value Mutual Funds
Before investing in top-value mutual funds, consider these factors:
- Past Performance: Analyse the fund’s performance over 5 to 7 years. This reveals how well the fund manager has pursued the value investing strategy across market cycles.
- Long-term Investment Horizon: Value funds are suitable for investors with a long-term outlook. Sticking to the investment horizon can yield significant returns over time.
- Expense Ratio: Like other mutual funds, value funds have an expense ratio, representing the fee for managing your investment. Be wary of frequent portfolio changes by the fund manager, which can lead to higher transaction costs.
- Market Risk: All mutual fund investments are market-linked and entail risk. Assess how the fund manager adjusts asset allocation to navigate market dynamics effectively.
Who Should Invest in Value Mutual Funds?
- Long-Term Participants: Value funds generally align with investors who have extended investment horizons, as undervalued stocks may take time to realise their potential.
- Moderate Risk Profiles: These funds may suit participants who are comfortable with equity market fluctuations and willing to hold through market cycles.
- Diversified Portfolios: Value funds can act as a component of diversified portfolios, offering exposure to stable, fundamentally strong businesses trading below intrinsic value.
- Contrarian Market Viewers: Investors who prefer identifying opportunities in temporarily undervalued or overlooked companies often find value funds aligned with this philosophy.
- Wealth Creation Objectives: Value funds typically attract those seeking steady, long-term capital growth through disciplined, research-based investing rather than short-term gains.
To Wrap It Up…
Value funds focus on identifying quality companies trading below their real worth. They follow a disciplined approach that benefits from market corrections over time. While performance varies across market cycles and strategies, value fund investment tips often highlight patience, research, and focus on fundamentals as key factors behind long-term success in value investing.
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Frequently Asked Questions (FAQs) About Value Funds
Value mutual funds are open-ended equity value funds that invest in companies trading below their true worth. This approach, known as value fund investment, focuses on identifying strong businesses with long-term growth potential.
A long-term value fund investment usually spans several years. Many investors stay invested for five years or more to allow the fund’s strategy to work through market fluctuations.
The performance of value funds depends on market trends and the quality of underlying companies. High-performing value funds often benefit when undervalued stocks gain during periods of recovery or growth.
Most equity value funds do not have a fixed lock-in period. Investors can exit these schemes whenever they choose, depending on their investment goals.
Value funds invest mainly in equities and follow the tax rules of equity-oriented mutual funds. Capital gains tax applies when investors redeem their units, similar to other value fund investment options.
Value mutual funds differ based on how fund managers identify and invest in undervalued companies. Some focus on firms with strong financials such as steady earnings, low debt, and stable cash flow. Others diversify across sectors to manage risk. Historical value fund performance, expense ratio, and fund management experience often help assess how consistently a fund has applied its value-investing approach over time.
A value fund invests in companies that trade below their true worth, often in sectors facing short-term challenges. A growth fund focuses on businesses expected to expand faster than the market. Value funds aim for stability, while growth funds target higher future potential.
