Where this fund manager is finding value today

Summary: Contrarian investing isn’t about bold bets, but about patience when sentiment turns sour. This piece explores how a value-biased approach is being applied today, where expectations are low, valuations offer comfort, and earnings recovery could quietly do the heavy lifting.

Contrarian investing is often misunderstood as making bold calls against the market. In practice, it is far more restrained. The approach looks for businesses where near-term disappointment has weighed on sentiment, but fundamentals are stabilising and valuations offer a margin of safety.

That framework shapes how Shibani Kurian, senior fund manager and head of equity research at Kotak Mutual Fund, is positioning her portfolios today. Kurian manages the Kotak Contra Fund alongside the Kotak Focused Fund and oversees several other equity strategies.

Rather than leaning on macro predictions, the contra strategy stays anchored in valuation discipline and diversification. The portfolio typically holds 50-60 stocks and retains the flexibility to move across market capitalisations. The emphasis is on limiting downside while remaining positioned for earnings recovery.

“From a valuation perspective, the strategy carries a value bias, which helps in containing downside, especially during periods of market volatility,” Kurian said in an interview with us. As of February 4, Kotak Contra Fund delivered 12.65 per cent returns over the past one year, compared with 9.35 per cent for its benchmark, the Nifty 500 TRI.

Financials: Recovery after a painful phase

Banking and financial services remain the fund’s most significant overweight. While the sector no longer looks contrarian today, positions were built when sentiment was far more cautious. The fund’s exposure to financials stands at around 34 per cent, slightly higher than the category average of about 32 per cent. Top holdings include HDFC Bank, ICICI Bank and State Bank of India.

“Banks have gone through a significantly painful period, marked by low credit growth and margin pressure due to falling interest rates,” Kurian said. “Incrementally, we are now seeing signs of improvement, with credit growth and margins beginning to bottom out. With the rate-cut cycle nearing its end, banks could become a major driver of earnings improvement.”

Healthcare: Hospitals stand out

Healthcare, particularly hospitals, is another area where Kurian sees value. Valuations remain reasonable, and operating metrics continue to improve. Kotak Contra Fund’s exposure to healthcare is close to 10 per cent, well above the category average of around 5 per cent.

Technology: Selective, not thematic

Technology is a more selective contrarian bet. Near-term growth visibility has moderated, and global IT spending remains uneven. However, balance sheets are strong, valuations have corrected, and long-term demand drivers remain intact.

Both Kotak Contra Fund and Kotak Focused Fund are meaningfully overweight technology, reflecting confidence in specific opportunities rather than a broad-based sector call.

Cement: A smaller but meaningful bet

Cement is a smaller allocation, but an important one from a contrarian standpoint. After a prolonged phase of muted volume growth, demand is expected to improve. With input costs largely under control, even modest volume recovery could translate into margin expansion, reflected in improving EBITDA per tonne.

The common thread

Across sectors, the common thread remains consistent: valuation comfort paired with improving earnings visibility. Rather than chasing what is currently in favour, the portfolio is positioned around businesses where expectations are low but fundamentals are turning.

That discipline, Kurian believes, is what allows a contra strategy to stay patient and resilient through market cycles, without relying on dramatic calls or short-term narratives.

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