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Reasons behind a 'Sell' recommendation for SBI Contra

Poor long-term performance, combined with a high expense ratio, has caused the fund to be in our 'Sell' recommendation, informs Ashutosh Gupta

What is the reason behind a 'Sell' recommendation for SBI Contra, which is a strong performer among value-oriented funds?
- Rajeev Bhatia

Well yes, we have a 'Sell' recommendation for SBI Contra. Although the fund delivered well in 2020, its long-term record isn't that impressive (see the graph below). In fact, if you look beyond 2020, the fund was an underperformer in bull as well as bear phases of the market.

But performance apart, its high expenses itself account for a no-go decision as far as buying the fund is concerned. That is because the direct plan of the fund comes at a price of 1.65 per cent in expense ratio which is far higher than our comfort zone. We are at a time when the costs of the funds are under close scrutiny, more so because a lot of actively managed funds have been finding it difficult to consistently beat their benchmarks. Also, at a time when fairly good options are available at well under 1 per cent expenses, we don't see a compelling reason to pay that high cost.

So, all these reasons contribute to having the fund under a 'Sell' recommendation.

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