Value-oriented indices delivered exceptional returns over the three-year period, with the Nifty200 Value 30 Index achieving a compounded annual return of 29.7% and the Nifty500 Value 50 Index returning 28.9% in the three years ended June 2026. In stark contrast, active value funds generated an average annualized return of 15.8% during the same period. According to reports from Business Standard, the divergence was even more pronounced over the past year, with most active value funds posting negative returns while the Nifty200 Value 30 and Nifty500 Value 50 indices gained 14.6% and 13.9% respectively.
Market participants attributed the outperformance of passive strategies to their greater exposure to PSU, energy, metals, and other cyclical stocks that dominated the value trade during the period. As reported by Business Standard, nearly half of the Nifty200 Value 30 Index is allocated to PSU- and energy-linked sectors such as oil and gas, metals, and power, which have been among the strongest-performing segments in recent years. Shweta Rajani, head of mutual funds at Anand Rathi Wealth, noted that the recent market cycle has been particularly favourable for passive value strategies, with this divergence in returns largely driven by differences in investment style and portfolio construction.
According to experts, direct comparison between active and passive value strategies can be misleading due to significant differences in portfolio construction. Ashwin Patni, head of wealth management solutions at Julius Baer India, explained that while value indices typically follow rules-based methodology selecting stocks primarily on quantitative metrics such as low valuations, active managers also assess factors such as management quality, earnings visibility, and balance-sheet strength. Piyush Gupta, director at Crisil Intelligence, highlighted that compared with the 30-50 stocks typically held by passive value indices, active value funds have historically been more diversified, holding around 60 stocks on average.
Aditya Agarwal, co-founder of Wealthy.in, identified several factors contributing to performance divergence, including active value funds maintaining concentrated positions, making tactical sector calls, or holding cash. As reported by Business Standard, many active managers combine value investing with growth-oriented opportunities, resulting in portfolios that may not closely resemble pure value benchmarks. Market cycles also matter significantly, as some phases favour deep-value stocks while others reward quality or growth businesses available at reasonable valuations. Despite the current outperformance, active value funds largely outperformed their broader benchmark, the Nifty500 Index, during the one-year period.
