Hello, welcome back. In the last lecture, we discussed about value stocks and growth stocks, we saw how we can identify a value stock and how we can identify a growth stock. We had made a formulation about that. Now, let's start putting that knowledge into practice. So, in this lecture, we will discuss about value funds. So, what are value funds?

Value funds are mutual funds that follow value investing strategy and thus seek to invest in stocks that are deemed to be undervalued in the market. Now, essentially you see that value funds are equity funds as they invest in invest primarily in stocks. So, these funds, they invest in value stocks, which are which have the characteristics of being undervalued in the market, as we have seen in the last lecture, as you would have realized, now, we have come to another way of classifying mutual funds. listed here are some Value funds, which are available in the Indian market. Now, as we have discussed before in India, it is important and it is mandatory for the mutual MCs to declare what is the investing strategy of a particular mutual fund before it is launched and that investment strategy needs to be maintained. Let's take one of the funds listed here and evaluate it.

Let us evaluate it I see I see a potential value discovery fund. This is by far the largest value fund in India, which has a UAM of nearly 15,000 crore rupees. We first see the holding pattern of this fund, we find that 90% of these funds money is invested in equities. So it is definitely a equity fund. And now let's see how it becomes a value fund. So presented here is the fund objective.

The fund objective states that the scheme seeks to generate returns through a combination of dividend income capital appreciation by investing primarily in well diversified portfolio of value stocks. So, very clearly the scheme says that they will invest in value stocks and we know that value stocks provide high dividend yield. So, they would like to make use of the dividend income for increasing the value of the fund and also the value stocks are expected to grow in a very high manner. So, that is where the capital appreciation should come in. Let us evaluate whether the fund managers are actually doing what they have stated as the objective of the fund or not. From the economic times you have said I have gathered where this particular fund is primarily invested in.

So listed here are the top line companies where this fund is invested in. We noticed that more than 4500 The funds money is invested in these nine companies. Now, we further we try to evaluate whether these companies are actually value stocks or not. So, we gather the information regarding the price to earnings ratio price to book value ratio and the dividend yield. I have planted these values for you on the screen and applied the formula which we introduced in the last lecture on on this values of p PB n dividend deed, we noticed that only three of the top line stocks can be actually called value stocks. So, those are the funds objective is that they will invest primarily in value stocks.

They are not really investing very heavily on value stocks. Second thing you notice is that the fund plans to make money through the dividend returns. However, we notice that the there are The three stocks which provide a decent dividend returns. If you notice carefully, the stocks of Indian Oil Corporation National Cyber Power Corporation and Infosys provide a decent decent dividend return search demanding socks do not provide a reasonable amount of dividend yield. So there seems to be some disconnect between what is the objective of this particular fund and what they're actually implementing on the ground. So, the such evaluation by the investor is is essential to notice whether the fund managers are actually doing what they're promised to do or not.

These evaluations are very critical and needs to be done before taking a plunge into investing in such funds. Thank you for listening. See you in the next lecture.