‘Value investing’ is at the heart of investing in the equity markets.
Charlie Munger, legendary investor Warren Buffett’s long-time partner and the architect of Berkshire Hathaway, once said, “All intelligent investing is value investing – acquiring more than you are paying for.”
Today, across the world, the term ‘value investing’ is commonly used when investing in equities. However, not all individuals follow it in the true nature and spirit.
It is often mistaken as merely buying low and selling high. That is not essential value investing; it is trading, which may prove hazardous to your wealth and health.
Value investing is understanding the price-value gap, understanding the business of the company, the dynamics of the industry it operates in, checking if there is an adequate economic moat, the quality of management and corporate governance practices, and ultimately the valuations.
When we talk about valuations, it includes factors such as Price-to-Equity (PE), Price-to-Book value (PB), the net-worth, Return on Equity (RoE), Return on Capital Employed (RoCE), the operating leverage, the debt-to-equity, dividend payout, dividend yield, whether it is cash-flow positive, etc.
So, it is figuring out what a business is worth and buying it for less.
Ideally, you should buy a stock if it offers a value proposition (and not just because the price is low) and sell at a high when valuations do not justify that price.
As Buffett puts it, “Price Is What You Pay, Value Is What You Get.”
The margin of safety, and at times even taking contrarian bets, recognising the true value, is the mainstay of value investing
In the interim, you would encounter volatility, but in the long run, your investment would prove valuable.
So, a host of quantitative, qualitative, tangible and intangible factors are involved. It entails a mental framework to determine ‘value’, and it can be rather subjective.
For this reason, value investing also finds its place in the profound quote, “Beauty lies in the eyes of the beholder.“
If you find value investing intricate or not your cup of tea, and would like to leave it to professional fund managers, consider value funds.
What is Value Investing in 2026?
Value funds are diversified equity funds whose aim is to identify fundamentally sound stocks that are trading below their intrinsic/fair value and hold them until their value/potential is realised.
Value bets could be found across market capitalisation segments: large-cap, mid-cap, and small-cap stocks; and sectors.
Given that, these funds invest across market caps and are sector agnostic.
As these funds invest in undervalued stocks, they potentially offer a better margin of safety compared to growth-oriented funds. This is one of the reasons why you should own a value fund in your core equity mutual fund portfolio.
Assessing the Market: Is Now the Time for Value?
If you have a high-risk appetite and an investment horizon of 5-7 years or more, it may be an opportune time to invest in some of the best value funds.
At present, the PE and PB ratios – across largecaps, midcaps, and smallcaps are either below or near their long-term 5-year averages, so the froth is settling down.
PE of the Nifty50 Value 20
The PE ratio and PB ratios of the Nifty50 Value 20 index are also currently at 17.4 and 3.0, respectively, below the 5-year averages. These are levels below even the broader market index, providing a sufficient margin of safety.
Many value funds are currently overweight on financials (Banks and NBFCs), consumer staples, oil & gas, power & utilities, pharma & healthcare, and information technology sectors, which are expected to fare well in 2026.
The timely and tactical allocation of value funds to sectors, such as PSU, oil & gas, capital goods, engineering, metals & mining, which have witnessed re-rating in the past, has been the primary driver behind the appealing performance of value funds. Since 2022, they have consistently outperformed growth-oriented equity funds.
In other words, value fund managers are now once again getting all the attention.
Want to know which are the top 3 value funds to consider in 2026?
Well, considering the portfolio characteristics, plus longer period returns and risk ratios, the top 3 contenders are:
Performance of the Top 3 Value Funds
| Returns – CAGR | Risk Ratios | |||||
| 3 Yrs (%) | 5 Yrs (%) | 7 Yrs (%) | SI (%) | Std Dev (%) | Sharpe Ratio | |
| ICICI Prudential Value Fund | 20.8 | 20.8 | 21.0 | 18.4 | 11.1 | 1.23 |
| HSBC Value Fund | 24.0 | 20.7 | 20.7 | 19.5 | 14.1 | 1.19 |
| Nippon India Value Fund | 23.4 | 19.5 | 20.3 | 16.4 | 13.5 | 1.15 |
| Category Average | 20.7 | 18.0 | 18.6 | – | 13.4 | 1.00 |
| BSE 500 TRI | 16.7 | 14.2 | 16.2 | – | 12.9 | 0.77 |
The Risk ratios have been calculated using calendar month returns for the last three years, and are as of 31 January 2026
source: fund factsheets
The Portfolio Characteristics of the Top 3 Value Funds
| No. of Stocks | Top 10 Stock (%) | Top 3 Sectors (%) | PB Ratio | PE Ratio | |
| ICICI Prudential Value Fund | 67 | 53.5 | 60.8 | 2.9 | 15.9 |
| HSBC Value Fund | 80 | 31.5 | 61.8 | 2.5 | 17.3 |
| Nippon India Value Fund | 71 | 38.3 | 61.8 | 2.7 | 22.1 |
source: fund factsheets
That said, don’t just base your investment decision on historical returns, which may or may not necessarily sustain in the future.
Instead, dig deeper to understand why these are among the best value funds in India today.
So, let’s dive in…
Deep Dive: The Top 3 Value Fund Contenders
#1 ICICI Prudential Value Fund
This scheme was launched in August 2004, as the ICICI Prudential Value Discovery Fund, and its name was changed with effect from June 16, 2025, to comply with the capital market directives for uniformity in the nomenclature.
It is among the popular and largest schemes in the value funds category, managing assets of over Rs 60,352 crore as per the January 2026 portfolio.
At present, the fund is holding nearly 95% of its assets in equities, around 2% in debt & money market instruments, and nearly 3% in cash & cash equivalents. In other words, the fund is currently almost fully invested.
That said, cautious about the froth in certain pockets of the market, it has held high cash levels in the past.
For example, in mid-2017, the cash and equivalent levels were recorded at approximately 9.8% to 11%, as the manager struggled to find ‘value’ in a rapidly rising market. Similarly, at the start of 2020, just before the COVID-19 pandemic crash, the fund held around 7-9% in cash. This tactical call has helped the fund to report a lower drawdown and redeploy aggressively at the bottom.
In addition, the fund has approached largecaps, midcaps and smallcap tactically, paying heed to valuations. For instance, between 2014-15, the fund rode the rally, finding immense value in smaller companies. But in 2017-18, when mid and smallcap were in an exuberant phase and bull, the fund pivoted the portfolio to mainly largecaps.
At present, too, the fund’s portfolio is inclined towards largecaps. As per the January 2026 portfolio, which has 67 stocks, nearly 89% of the total assets are in largecaps, 6% smallcaps, and 5% midcaps.
The top 10 stocks are currently 53.5%, making it a bit concentrated compared to some of its peers, but also talking about the conviction with which it approaches stocks.
Top Holdings of ICICI Prudential Value Fund
source: fund factsheet
Historically, the fund’s portfolio turnover ratio has ranged between 46-47% in the last one year, and as per the last portfolio is 47% — reflecting its buy-and-hold contrarian philosophy.
Typical of value style, the fund has followed a bottom-up approach to identify and select undervalued stocks after evaluating them on several parameters such as historic performance, earnings, book value, free cash flow, and dividend yield.
Additionally, the fund manager has also considered factors such as management quality, business competitiveness, and growth prospects of companies in the investment evaluation process.
The current portfolio valuation ratios – PB and PE – reveal that the fund is quite conscious of the value.
With such a strategy, the fund has yielded a CAGR of 20.8% and 21.0% over the last 5 years and 7 years, respectively, outperforming the category average and its benchmark index (as of 16 February 2026).
Moreover, the fund has exposed its investors to lower risk (standard deviation of 11.1%) than the category average and the benchmark, placing it as an above-average performer on a risk-adjusted basis (Sharpe ratio of 1.23).
#2 HSBC Value Fund
This scheme was launched in January 2010 and was previously known as L&T Value Fund until the L&T Mutual Fund business was acquired by HSBC Mutual Fund in November 2022.
It is currently the second-largest scheme in the value funds category, managing assets over Rs 14,552 crore as per the January 2026 portfolio.
The fund focuses on companies with an attractive combination of profitability and valuations.
Simply put, it follows a blend of value and growth style of investing.
The fund looks at owning scalable businesses with strong execution capability, proven management track record and strong financials – basically the quality businesses.
At present, the fund is almost fully invested, with nearly 97% exposure to equities and 2% in cash & cash equivalents.
Unlike some of its peers, the fund has rarely taken aggressive cash calls. Only before the acquisition of L&T Mutual Fund by HSBC Asset Management Company, in extreme market peaks, the fund held 7-9% in cash, but its typical cash holdings have been 1-5%.
In the past, comparable with its peers, it has played the market cap cycles. For example, in the 2014 bull run, it focused on undervalued midcaps and thereafter shifted to largecap following the 2018 midcap crash.
Since November 2022, after HSBC acquired the L&T Mutual Fund business, the fund has predominantly held a largecap biased portfolio but with less weightage than the category peers.
As per the January 2026 portfolio, the fund has 47% in largecaps (lower than the category average of 69%), 28% in smallcaps (category: 18%), and 25% in midcaps (category: 18%).
In all, the fund is holding a well-diversified portfolio of 80 stocks, of which the top 10 comprise 31.5% while the top 3 sectors 60.8%.
Top Holdings of HSBC Value Fund
source: fund factsheet
What’s noteworthy is that HSBC Value has held most of the stocks with conviction with a long-term view.
The portfolio turnover has ranged between 29-30% in the last year. You can interpret this as the fund manager replacing roughly one-third of the portfolio’s holdings in a year. The last portfolio turnover ratio is just 30%.
Also, the current portfolio valuation ratios – PB and PE – underscore the fund’s value-conscious approach.
In the last five years, many of the fund’s top holdings, such as SBI, MCX, Karur Vysya Bank, etc., have performed phenomenally well, helping to push the performance of HSBC Value Fund.
In the last 5 years and 7 years, the fund has clocked a CAGR of 20.7% each, outshining the category average and the benchmark.
The fund, due to its multicap approach, has exposed investors to slightly higher risk (standard deviation of 14.1) than the category average and benchmark, but when evaluated on a risk-adjusted basis (Sharpe ratio of 1.19), it seems well-justified.
#3 Nippon India Value Fund
This fund was launched in June 2005 as the Reliance Value Fund. However, was renamed in September 2019 after Nippon Life Insurance acquired 75% majority stake in Reliance Nippon Life Asset Management (RNAM).
The fund’s AUM has grown over the years and is currently over Rs 8,961crore, as per the January 2026 portfolio.
It aims to identify undervalued stocks across market caps, having high potential by using fundamental analysis.
It avoids value traps where the long-term growth is uncertain or can be disrupted. It looks for companies based on sound management, good track record, potential for future growth, and the industry economic scenario, among a host of other parameters.
Currently, the fund is holding 93% of its assets in equities and around 7% in cash & cash equivalents.
Historically, the fund has maintained 2-7% in cash. Even during the high market volatility (such as the 2013 taper tantrum, the 2018 mid-cap correction, or the 2020 COVID-19 crash), the fund hasn’t taken aggressive cash calls — it has preferred to stay almost fully invested.
It maintains well-balanced exposure across market caps, wherein largecap have typically been in the range of 55-65%.
Currently, it has 63% allocated to largecaps, 22% into midcaps, and 15% in smallcaps. The fund has 71 stocks in its present portfolio, wherein the top 10 stocks comprise 38.3%, making it fairly diversified, while the top 3 sectors are nearly 62% of the portfolio.
Top Holdings of Nippon India Value Fund
source: fund factsheet
Some of the top holdings in the underlying portfolio, such as ONGC, SBI, ICICI Bank, Vedanta, etc., have fared quite well, while some, such as Infosys and IndusInd Bank, have lagged.
Nevertheless, it has tactically approached its portfolio with slightly more churning, keeping an eye on sector rotation when required. The portfolio turnover ratio has ranged between 40-54% in the last one year. Its latest portfolio turnover ratio is 40% as per the January 2026 portfolio.
The fund’s portfolio PE and PB ratios are currently 22.1 and 2.7, respectively. This is lower than the Nifty 500, but on PE slightly more aggressive than some of its peers.
The approach followed by the fund has yielded a CAGR of 19.5% and 20.3% over the past 5 years and 7 years, respectively.
The risk exposed by the fund (standard deviation of 13.5%) is almost in line with its peers, but on the risk-adjusted basis (Sharpe ratio of 1.15), the fund has performed well.
Risk Management: The Value Investor’s Shield
Although value funds are supposed to be value-conscious, don’t make the mistake of assuming that they are low risk. Given that they have exposure across market cap segments, the risk is very high.
Value funds may underperform in the short to medium term, particularly if the focus shifts to growth and momentum investing.
But over the long-term, if you have got your fund choices right, they could generate wealth and prove to be a valuable proposition for you.
Hence, pick your funds carefully,
Happy investing!
Note: We have relied on data from www.valueresearchonline.com, www.financialexpress.com, and the factsheets published by the respective fund houses throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Returns data as of 16 February 2026. Direct Plan and Growth Option Considered. The Risk Measures have been calculated using calendar month returns for the last three years. The Risk Measures have been calculated using calendar month returns for the last three years and are as of 31 January 2026.
Standard Deviation is a measure of the total volatility of the fund. The Sharpe Ratio is a measure of risk-adjusted return that shows how much excess return an investment generates for each unit of risk taken.
Portfolio data as of 31 January 2026. The average of the price-to-book value ratios and price-to-equity ratios of all underlying stock holdings in proportion to their portfolio weights is considered.
Disclaimer:
Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.
Rounaq Neroy has over 20 years of experience in the financial markets and investments. He is a close observer of the Indian economy and writes deeply on the capital markets, mutual funds, stocks, precious metals, asset allocation, wealth management, and investment strategy. His editorials provide interesting, actionable investment ideas to guide readers in the journey of wealth creation and make wise decisions. Rounaq was the Head of Content at PersonalFN (Quantum Information Services Pvt. Ltd.), which also owns Equitymaster.com – India’s oldest and trusted equity research house.