Baroda BNP Paribas Value Fund NFO – Insights & Analysis

Baroda BNP Paribas has launched Value Fund that would open for subscription from 17th May 2023. Baroda BNP Paribas Value Fund is an open-ended mutual fund scheme that follows value investment strategy. Under this strategy, fund would invest in undervalued stocks which has high potential to multiply your money in long term. Should you invest in Baroda BNP Paribas Value Fund New Fund Offer (NFO)? What are the various risk factors associated with such funds?

Baroda BNP Paribas Value Fund NFO – Issue Details

Here are the NFO details.

Scheme Opens 17-May-23
Scheme Closes 31-May-23
Scheme reopens for continuous purchase/sale Within 5 business days
Minimum Lumpsum Rs 5,000
Minimum SIP Rs 500 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load For units in excess of 10% of the investment,1% will be charged for redemption within 365 days
Risk Very High Risk
Benchmark NIFTY 500 TRI
Fund Manager Mr Shiv Chanani
Max TER 2.25%

Baroda BNP Paribas Value Fund SID

What is the investment objective of this MF scheme?

The Scheme seeks to generate long term capital appreciation from a diversified portfolio of predominantly equity and equity related instruments by following a value investment strategy.

There is no assurance or guarantee that the investment objective of the scheme will be realized.

What is the allocation pattern in this mutual fund?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Equity or Equity Related Instruments across market capitalization 65% 100% High Risk
Debt and Money Market Securities 0% 25% Low to Medium
Units issued by REITs & INvITs 0% 10% Medium to High
Units of Mutual Fund Schemes 0% 10% Medium to High

Why to invest in Baroda BNP Paribas Value Fund NFO?

Investing in value mutual funds offers several advantages:

1) Potential for higher returns: Value funds aim to invest in undervalued stocks, which have the potential to generate higher returns when the market recognizes their true value. Buying assets at a discount can result in significant gains as they appreciate over time.

2) Focus on fundamental analysis: Value investing emphasizes analyzing the fundamental characteristics of companies, such as their earnings, assets, and cash flows. This approach can provide a more solid foundation for investment decisions, as it focuses on the underlying value and financial health of the companies being considered.

3) Long-term perspective: Value mutual funds typically have a long-term investment horizon. This approach aligns with the philosophy that the market will eventually recognize the value of undervalued stocks, leading to potential price appreciation over time. Long-term investing can reduce the impact of short-term market fluctuations and increase the likelihood of achieving investment goals.

4) Lower volatility: Value stocks tend to be more stable and less prone to wild price swings compared to growth stocks, which can be more speculative in nature. This lower volatility can provide a smoother investment experience and help investors stay committed to their long-term investment strategy.

5) Potential downside protection: Value investing focuses on purchasing stocks at a discount, which can provide a level of downside protection during market downturns. The inherent margin of safety inherent in value investing can help cushion against significant losses and provide a more resilient portfolio during challenging market conditions.

Some key risk factors you should consider before you invest in such funds

While investing in value mutual funds has its advantages, there are also some potential drawbacks to consider:

1) Prolonged periods of underperformance: Value investing strategies can experience extended periods of underperformance, especially during market cycles when growth-oriented stocks are favored. This can test investors’ patience and potentially lead to lower returns compared to other investment approaches.

2) Limited exposure to high-growth sectors: Value funds tend to focus on mature, established companies with stable earnings and lower growth rates. This approach may result in limited exposure to high-growth sectors or innovative companies that could potentially deliver significant returns in the future.

3) Value traps: Identifying undervalued stocks can be challenging, and there is a risk of falling into value traps. These are stocks that appear cheap but may have underlying issues or poor prospects, causing their prices to remain depressed or decline further. It requires thorough analysis and research to avoid investing in such value traps.

4) Limited diversification: Some value mutual funds may have a concentrated portfolio, meaning they hold a relatively small number of stocks. This lack of diversification can increase the investment risk, as the performance of the entire fund may be heavily dependent on a few key holdings.

5) Potential for value traps during economic downturns: Economic downturns can lead to an increase in the number of undervalued stocks, but it can also create value traps. During periods of economic distress, companies facing significant challenges may appear cheap but could be struggling with fundamental issues that make them poor investment choices.

6) You can refer complete risk factors of investing in this scheme in SID / KIM / NFO prospectus.

Past Performance of Value Mutual Funds

Here is the quick snapshot on the performance of the existing funds from this category. (annualized returns)

Scheme Name 1 Yr 3 Yrs 5 Yrs 10 Yrs
ICICI Prudential Value Discovery Fund 16% 35% 15% 19%
JM Value Fund 21% 32% 13% 16%
Templeton India Value Fund 20% 41% 12% 15%
Nippon India Value Fund 12% 32% 12% 16%
UTI Value Opportunities Fund 11% 27% 12% 13%
Bandhan Sterling Value Fund 14% 45% 12% 18%
HSBC Value Fund 17% 33% 12% 19%
Tata Equity PE Fund 17% 27% 10% 18%
HDFC Capital Builder Value Fund 13% 30% 10% 16%
Quantum Long Term Equity Value Fund 10% 27% 9% 12%
Indiabulls Value Fund 10% 25% 7%
Aditya Birla Sun Life Pure Value Fund 14% 31% 5% 17%
Union Value Discovery Fund 13% 28%
IDBI Long Term Value Fund 10% 26%

Baroda BNP Paribas Value Fund NFO – Should you invest?

Baroda BNP Paribas Value Fund invests based on value investment strategy i.e., investing in undervalued stocks.

Investing in value mutual funds has its pros and cons.

On the positive side, value funds tend to offer the potential for higher returns as they focus on undervalued stocks. They also provide a disciplined investment approach with a long-term perspective.

However, the downside includes the possibility of prolonged periods of underperformance, as the market may take time to recognize the value of the selected stocks. Additionally, value investing requires patience and research skills to identify truly undervalued opportunities.

If you do not want to test with new value funds, you can invest in some of the existing Value funds that have proven its performance.

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