Does the “latest launch” always mean better value?

A useful way to understand this is through the smartphone market.

Every year, a new flagship model launches with significant marketing attention, advertising campaigns, and high consumer visibility. Meanwhile, last year’s premium model — which may still offer stable performance, established features, and long-term usability — often receives less attention.

This may not necessarily reflect a change in product quality or fundamentals, but rather a shift in consumer and market focus.

Something similar can happen in the stock market.

At different points in time, investors may focus on trending sectors, fast-moving themes, or popular stocks, while some fundamentally stable businesses tend to move out of focus. This is often when value-oriented strategies receive attention.

Value investing focuses on identifying companies that may be trading at relatively reasonable valuations compared to what some investors believe could be their long-term business potential.

What are value funds?

As per SEBI categorisation, value funds are equity mutual funds that follow a value investment strategy.

In simple terms, these funds invest mainly in stocks that the fund manager believes may currently be undervalued or temporarily underappreciated by the market.

These could include businesses with:

1. Stable earnings
2. Strong balance sheets
3. Established operations
4. Healthy cash flows
5. Lower valuations compared to peers

The objective is not necessarily to look for the “cheapest” stocks available, but to identify companies where market prices may not fully reflect underlying business fundamentals.

For those interested, an explainer video on the concept is available here:

Why do some fundamentally stable companies trade at lower valuations?

Stock prices are influenced by several factors beyond just business performance, including market sentiment, sector-wide trends, short-term earnings pressures, and broader economic uncertainty.

As a result, even companies with stable operations may sometimes trade at relatively lower valuations for a period of time.How do value funds identify opportunities?

Value funds are actively managed by professional fund managers.

This means fund managers research companies, analyse industries, evaluate financials, and study valuations before making investment decisions.

Some commonly tracked factors include earnings growth, debt levels, cash flows, industry outlook, business quality, and valuation measures such as P/E and P/B ratios.

For first-time investors, these ratios are tools used to compare a company’s stock price with its earnings or assets.

The objective is to identify businesses where valuations appear relatively reasonable compared to long-term fundamentals.

Why are value funds often discussed during volatile markets?

During strong market rallies, valuations in certain segments of the market can rise sharply.

At such times, some investors may explore companies that may appear comparatively reasonably valued instead of focusing on high-momentum segments. This is one reason value-oriented strategies are often discussed during volatile or expensive market phases.

However, like all equity mutual funds, value funds carry market risks and may experience short-term volatility.

Additional educational material related to value funds is available on the AMC website here: Mutual Funds - Invest in Mutual Funds Online | ICICI Prudential MF

What should investors keep in mind?

Value investing may require patience, as stocks considered undervalued can remain out of favour for extended periods before market sentiment changes.

Equity investments carry risk, and since value funds invest predominantly in equities, their value can fluctuate depending on market conditions.

Different investment strategies may perform differently across market cycles.

Investments should align with financial goals, and investors may consider their risk appetite, investment horizon, and diversification needs before investing.

Final thoughts

Value investing is one of several approaches used in equity investing. While the strategy focuses on identifying potentially undervalued opportunities, investment outcomes are influenced by market conditions, economic developments, and company-specific factors.

Before investing, individuals may consider consulting a financial advisor and evaluating their financial goals, risk appetite, and investment horizon.

I. Know Your Customer (KYC):

Investors are required to complete Know Your Customer (KYC) formalities before investing in mutual funds. This may be completed by submitting the KYC form and required self-attested documents at an AMC branch or Point of Service.

Required documents generally include:

• Passport-sized photograph
• PAN card copy as proof of identity
• Address proof such as Voter ID, Passport, or Driving License

KYC-verified investors seeking to update information may submit a KYC Details Change Form with supporting documents.

II. SEBI-registered Mutual Funds:

Investors are advised to invest only with SEBI registered Mutual Funds. The list of registered Mutual Funds is available at https://www.sebi.gov.in/intermediaries.html

III. Complaint Redressal:

For queries or grievance redressal, investors may contact enquiry@icicipruamc.com or call 1800222999.

Escalation requests may be addressed to the Investor Service Officer at servicehead@icicipruamc.com. For this purpose, Mr. Rajen Kotak is the Investor Relations Officer of the Mutual Fund. He can be contacted at 2nd Floor, Block B-2, Nirlon Knowledge Park, Western Express Highway, Goregaon (East), Mumbai – 400 063. Tel No.: 022-2685 2000, FAX No.: 022 -2686 8313.

Complaints may also be registered on SCORES (SEBI Complaints Redress System) through https://scores.sebi.gov.in

Further, complaints may be lodged through the Online Dispute Resolution Portal (‘ODR’) Portal available at https://smartodr.in/login

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

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