The ICICI Prudential PMS Contra Strategy, which focuses on contrarian bets in the equity markets, is an example of how this approach could be rewarding for investors. Since its launch five years ago this offering from ICICI Prudential PMS has given substantial return to investors.  

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Under the ICICI Prudential PMS Contra Strategy investments are made in equity stocks which are currently not seeing an upward trend but are expected to give higher returns in future.

According to ICICI Prudential PMS, a lump sum investment of Rs 1 crore under the strategy at the time of its inception in 2018 would have turned into approximately Rs 2.4 crore as of September 14, 2023, with an annualised return of 20 per cent.  

The ICICI Prudential PMS Contra Strategy was launched on September 14, 2018.  The strategy involves investing predominantly in equity and equity related instruments through contrarian plans aimed at generating capital. Generally, the fund managers target the underperforming stocks which can give higher returns in future.

Meanwhile, the same amount invested in S&P BSE 50 TRI would have offered an annualised return of 14 per cent in the last five years and would have grown into Rs 1.8 crore, ICICI Prudential PMS said.

ICICI Prudential PMS Contra Strategy's Focus Segments

One of the major drivers of success for the Contra Strategy is its concentration in manufacturing and related industries. In the past five years the strategy has made investments in sectors like commodities (metals), industrial products, auto ancillaries, logistics, corporate banks, and utilities. The fund benefited from investments in these areas at reasonable valuations that offer solid earnings prospects, making them enticing investment opportunities. Another positive feature of the model’s performance was its decision to allocate underweight into IT, Consumer Goods and Pharma sectors. This strategic move had also contributed to the overall return of the fund.

ICICI Prudential PMS Contra Strategy Investment Portfolio

As on August 31, 2023, ICICI Prudential PMS Contra Strategy Portfolio has 24 selected stocks. In particular, the top 10 positions represent 56 per cent of the allocation. By market cap distribution, larger companies make up 53.2 per cent while small-caps comprise 25.6 per cent, and mid-caps amount to 21.2 per cent of the index components.

A key factor to the Contra Strategy’s success is ICICI Prudential PMS’ in-house BMV (Business-Management-Valuation) framework. The goal of this framework is to pinpoint firms that are durable and can sustain long-term growth. By investing in high quality firms with good management teams trading at rational prices, the strategy has generated alpha relative to index over time periods and in different market regimes.