Old Pension Scheme: Value mutual funds had a challenging 12 months, with most schemes failing to generate impressive returns. According to Value Research data (as of July 20, 2026), only 4 out of 23 value mutual funds managed to deliver double-digit returns, while 9 schemes ended the year with negative returns.

At first glance, the numbers suggest value investing has lost its appeal. However, market experts say the reality is far more nuanced. They believe the disappointing returns were driven more by fund managers’ stock selection and portfolio strategy than by any weakness in the value investing approach itself.

🏆 Top 4 Value Mutual Funds That Delivered Double-Digit Returns

Among the 23 value-oriented mutual funds, Quant Value Fund emerged as the top performer.

Source: Value Research (Data as of July 20, 2026)

📉 Worst-Performing Value Mutual Funds

Several schemes struggled significantly during the past year.

One of the biggest surprises was the ICICI Prudential Value Fund, India’s largest value fund with an AUM exceeding ₹60,000 crore, which posted a -0.72% return over the past year.

🤔 Why Did So Few Value Mutual Funds Outperform?

Experts believe investors shouldn’t blame the value investing style itself.

According to Jiral Mehta, Senior Manager – Research at FundsIndia, value investing has actually been one of the strongest-performing investment styles in recent years.

“Our research shows that the value style has been the best-performing investment style over the last one, three and five years, outperforming quality, momentum, low-volatility strategies and even the broader Nifty 500.”

So why did only four funds generate double-digit returns?

The answer lies in portfolio construction and stock selection.

Some fund managers invested in companies that remained undervalued longer than expected, while others held stocks where the expected valuation re-rating never materialised.

📌 Sector Allocation Made a Big Difference

According to Sriram BKR, Senior Investment Strategist at Geojit Financial Services, sector allocation played a crucial role.

Many underperforming value funds had significant exposure to sectors such as:

• 💻 Information Technology (IT)
• 🛒 FMCG
• 🏭 Select manufacturing businesses

These sectors witnessed weaker earnings growth and price pressure during the year, hurting overall fund performance.

📈 When Do Value Mutual Funds Perform Best?

Value investing is a cyclical investment strategy.

Experts say these funds generally outperform during:

✅ Economic recoveries

✅ Bull markets

✅ Broad-based market rallies

✅ Periods when undervalued companies regain investor attention

According to Amitabh Lara, Executive Director at Anand Rathi Wealth, the best example was the post-Covid rally.

During calendar year 2021, value mutual funds generated an average return of nearly 35%, outperforming the Nifty 50 by around 10 percentage points.

However, the last two years have been different.

Global uncertainties, high interest rates, geopolitical tensions and delayed valuation re-ratings have limited returns across much of the category.

⏳ Should You Judge Value Mutual Funds Based on One-Year Returns?

Most experts say absolutely not.

Value investing is designed for patient investors.

Unlike momentum investing, value investing often takes years before fundamentally strong but undervalued companies receive fair market valuations.

Experts recommend investors maintain an investment horizon of 5 to 7 years.

📚 What Research Says About Long-Term Performance

FundsIndia’s research highlights an important fact about mutual fund performance.

Only:

• 📌 26% of funds that ranked in the top quartile during one three-year period remained in the top quartile over the next three years.
• 📌 Over five-year periods, the figure drops to 21%.

This suggests that short-term winners often fail to remain leaders over longer periods, making one-year returns an unreliable indicator of future performance.

💡 What Investors Should Evaluate Instead

Rather than chasing recent winners, experts recommend assessing value mutual funds based on:

✔️ Rolling 3-year returns

✔️ Rolling 5-year returns

✔️ 10-year performance record

✔️ Downside protection during market corrections

✔️ Portfolio valuation

✔️ Consistency of investment philosophy

✔️ Fund manager’s long-term discipline

📝 Final Take

While only four value mutual funds delivered double-digit returns over the past year, experts believe the category remains fundamentally strong. The underperformance was largely driven by stock selection, sector exposure, and delayed market recognition of undervalued companies—not by a failure of the value investing strategy itself.

For long-term investors, one-year returns should not be the deciding factor. Instead, focus on a fund’s ability to consistently follow its investment philosophy, manage risk effectively, and deliver superior returns across multiple market cycles.

🔍 SEO FAQs

❓Which value mutual fund gave the highest return in 2026?

Quant Value Fund topped the category with a 16.23% one-year return, according to Value Research data as of July 20, 2026.

❓Why did most value mutual funds underperform?

Experts attribute the weak performance to poor stock selection, sector allocation, and delayed valuation re-rating rather than weakness in the value investing strategy.

❓Are value mutual funds good for long-term investing?

Yes. Financial experts recommend holding value mutual funds for 5–7 years to benefit from different market cycles.

❓Should investors avoid value mutual funds after weak one-year returns?

No. Experts suggest evaluating funds based on rolling 3-, 5-, and 10-year performance, consistency, and downside protection instead of short-term returns.