Bandhan Contra Fund NFO: A contrarian strategy for long-term wealth creation

The Bandhan Mutual Fund is launching its NFO, the Bandhan Contra Fund NFO, on 10^th August 2026. The NFO will close on 24^th August 2026. In this article, we will review the NFO and understand why a contrarian strategy could be a good addition to your investment portfolio, especially in current market situation.

What is contrarian investing?

Contrarian investing goes against market trends to find undervalued opportunities, leveraging inefficiencies for long-term gains. The Contrarian strategy involves investing in mispriced assets driven by emotion-driven market behaviours, such as panic-driven sell-offs, recession fears, and regulatory setbacks that drag stock prices below their intrinsic value. The stocks are then sold or adjusted when market sentiments align with the asset's true value. Since contrarian investors buy stocks at deep discounts relative to their intrinsic value, they can get good returns in the long term. Contra investing should not be confused with value investing, as it focuses on market sentiment and inefficiencies rather than on intrinsic value alone. The table below illustrates the difference between the two.

Contra opportunities are classified into four broad buckets:

• Turnaround plays


• Macro-driven opportunities


• Sentiment-driven opportunities


• Sector-wide overhang situations

This approach is different from momentum chasing or consensus investing. Instead of following what is already working, a contra strategy tries to identify where pessimism may have gone too far.

Types of contra opportunities

Contra is an everlasting theme

Sectors move in and out of favour. A sector that is out of favour in one year can be in favour next year (see the table below). Fund managers can invest in such sectors / companies at attractive valuations and investors can benefit from valuation re-rating.

Source: ICICI Securities, *as on 30^th June 2026. BSE/NSE indices of the aforementioned sectors have been considered. Sectors/ Stocks mentioned here should not be construed as a recommendation. Bottom and Top Performing Sectors have been considered for Out-of-favour and In-favour segments respectively.

About Bandhan Contra Fund NFO

Bandhan Mutual Fund’s new Bandhan Contra Fund NFO is designed for investors who are willing to look where the market is not looking. The scheme follows a contrarian investment strategy, meaning it seeks opportunities in stocks and sectors that are currently out of favour but may have strong long-term re-rating potential. The investment objective of the Scheme is to seek to generate capital appreciation from a diversified portfolio of equity and equity-related instruments by following a contrarian investment strategy. Managed by Mr. Manish Gunwani and Mr. Prateek Poddar, the scheme is a blend of contrarian plus growth, which means it is not restricted to deep value ideas alone. Instead, it aims to combine resilience, reversion, and rerating potential with sustainable earnings visibility.

Why contra strategies work

Markets often overreact to bad news. Stocks can fall sharply because of a temporary earnings miss, a macro shock, a governance scare, or a sector-wide slowdown, even when the underlying business remains intact. When fundamentals stabilise and sentiment improves, the valuation gap can close quickly and reward investors who entered early.

Examples:

• Paytm moved from a “cash-burn” narrative toward profitable growth as business quality improved.


• IHCL recovered as travel normalised and the market began to value it as a premium consumption story again.


• Adani Energy Solutions saw sentiment normalise after legal and governance overhangs eased, while its earnings visibility stayed intact.


• SBI benefited from a long cleanup cycle in PSU banks, with improving asset quality and credit growth driving rerating.

Investment Philosophy

The fund predominantly invests in stocks chosen from the top 500 companies, ensuring liquidity and a broad opportunity set while maintaining quality. The stock selection process involves disciplined entry and exit using the proprietary framework, The 4 Gate Contrarian Framework.

Risks to keep in mind

Like every contrarian strategy, this one carries meaningful risk. A stock may look ignored because it is genuinely weak, not merely misunderstood. That creates the danger of value traps, where cheapness never converts into recovery.

Three major risks associated with the fund may be:

• Prolonged underperformance, mispriced assets, and systemic market risks.


• Some stocks may be fundamentally weak, risking permanent capital loss.


• The fund emphasizes transparency, risk awareness, and consulting financial advisors before investing.

So, while the strategy can potentially deliver differentiated returns, it should only be used by investors who understand volatility and can stay invested through uncomfortable phases.

Why invest in Bandhan Contra Fund now?

• Geopolitical risks have increased over the last few years, contributing to volatility in the equity market


• Indian equities have diverged sharply from global peers like South Korea and Taiwan, largely due to sustained FII outflows from India and a re-allocation of capital toward markets better positioned to benefit from AI-driven growth.


• This has resulted in sectoral divergence in valuations widening (see the table below), creating a fertile ground for selective contrarian bets.
  
  

  

  Data Source: Nuvama, ICRAMFI360. Data as on Jun’2026. BSE/NSE indices of the aforementioned sectors have been considered. Sectors/Stocks mentioned here should not be construed as a recommendation from Bandhan Mutual Fund. Returns are for Total Returns Indices

  
  At a time when valuations are increasingly divergent across sectors, a disciplined contra approach can help investors capture mispricing created by fear, neglect, or temporary headwinds. A fund following the contrarian strategy may latch onto diversification in the true sense of the word by identifying undervalued stocks that are high-quality and high-growth, opening the window of opportunity to make long-term gains when market sentiments are restored and valuations are consolidated.

Who should invest in the Bandhan Contra Fund?

The fund may be suitable for investors:

1. Seeking to capture market inefficiencies


2. Willing to invest in unloved ideas with rerating potential


3. Who can tolerate periods of underperformance


4. Who prefer a differentiated equity strategy


5. Having a long investment horizon and patience for sentiment reversals

This is not a fund for investors looking for quick results. Contra investing often works slowly, and the portfolio may lag in momentum-led markets before the thesis plays out.

Consult a mutual fund distributor or your financial advisor to understand if the fund is suitable for you.