If you like taking the road less travelled with your investments, contra funds might just catch your eye. These funds follow a simple but bold idea: they invest in stocks and sectors that are currently out of favour, betting on their long-term potential when the market mood eventually turns. It is a classic value investing play, built on patience and conviction.
But the big question is: Is 2025 the right time for you to consider contra funds? With market valuations stretched in pockets and sector rotations picking up pace, this is a conversation worth having, and we’re about to break it down for you.
What Are Contra Funds?
Let’s quickly get you up to speed on what contra funds actually are. In simple terms, these are mutual funds that love to go against the market crowd. While most investors chase what’s hot right now, contra funds look for stocks and sectors that are currently out of favour or undervalued, generally the kind others are avoiding.
The general idea is to pick up quality companies when they are temporarily down, hold them patiently, and benefit when the market eventually realises their true worth. It is a strategy that rewards patience and a strong stomach for short-term market mood swings — perfect if you don’t mind swimming against the tide.
Market Conditions in 2025: What’s Happening Now
If you have been tracking the markets in 2025, you have probably noticed it’s been a bit of a mixed bag. On one side, we have seen markets hit fresh highs, fuelled by strong domestic flows and global optimism. But at the same time, concerns around sticky inflation, global interest rates, and patchy corporate earnings have led to pockets of correction.
Certain sectors have clearly overheated, while others have quietly underperformed. And this is exactly the kind of setup contra funds love. When popular sectors look pricey and ignored ones are showing long-term promise, contra mutual fund strategies find their sweet spot. If you understand the risks involved, this could be an interesting moment to explore.
Why Contra Funds May Be Relevant in 2025?
Simple — there is opportunity in the unloved corners of the market, and you can benefit from that. Sectors that were out of favour are starting to show signs of life, and with momentum stocks looking overheated, a rotation towards value themes feels inevitable.
Contra funds help you tap into these hidden opportunities, backed by professional fund managers who stay clear of retail FOMO traps. This is also a smart way to position your portfolio defensively without turning overly conservative. If you like the idea of buying low and waiting for the market to catch up, this could be your play.
Risks of Investing in Contra Funds Right Now
Before you dive in, it is good to know what you are signing up for. Contra funds aren’t for everyone, and here’s why:
● Undervalued stocks can take time to recover – patience is non-negotiable.
● Not ideal for short-term goals or if market swings make you nervous.
● Tend to underperform during strong bull markets, when hot favourites rally and value picks get ignored.
However, if you are okay with playing the long game, it could still work in your favour.
Who Should Consider Investing in Contra Funds?
Here’s a quick checklist of who should consider investing in contra funds:
● Best suited for moderate to aggressive investors with a long-term horizon of 5–7 years.
● Perfect if you’re looking to diversify your portfolio with a contrarian strategy.
● Ideal for those comfortable being patient when others chase trends.
● Not recommended if you prefer momentum-driven stocks or are a conservative, risk-averse investor.
Best Performing Contra Funds in 2025
Here is a list of the top-performing contra funds as per their long-term returns in recent years: [1]
Fund Name | 1Y Returns | 3Y Returns | 5Y Returns |
SBI Contra Fund Direct – Growth | +3.46% | +26.51% | +35.09% |
Kotak India EQ Contra Fund Direct – Growth | +3.42% | +26.84% | +27.94% |
Invesco India Contra Fund Direct – Growth | +9.98% | +26.18% | +26.62% |
SIP or Lumpsum: What’s Better in 2025?
Here’s how you can decide between SIP and lump sum investing:
● SIP is your friend in a volatile market, letting you invest steadily without stressing about timing.
● Lump sum works if markets correct sharply or you have idle cash waiting to be deployed.
Pick what suits your situation and risk comfort.
Final Verdict: Is Now the Right Time?
So, is now a good time for you to consider contra funds? Given the current market mood, with some stocks looking pricey and others quietly undervalued, contra funds are well placed to spot those hidden opportunities. They offer a different flavour for your portfolio, especially if you are someone who likes going against the crowd.
But remember, this is not a quick win. Contra funds demand patience and can underperform when the market is chasing trends. If you have a high-risk appetite and you are okay playing the long game and trust the value approach, then yes — it could be a smart move for you this year.