Mumbai: For aggressive investors, the recent underperformance of an index fund category that tracks the 30 fastest-rising stocks from the Nifty 200 universe may open up a window to invest gradually at lower levels.In the past year, the Nifty 200 Momentum 30 Index lost 9.75% against the 10.5% gains in the Nifty. In the last six months, the index lost 10.51%, while the Nifty 50 advanced 3.29%."Momentum factor has struggled in the last two quarters as markets came off after hitting a peak in September 2024," says Prateek Sinha, director, Deep MFD. He said the momentum strategy underperformed in 2009 and 2023 and it lasted for around 10-11 months."Once the market finds its rhythm, momentum strategies will outperform again," said Sinha."It would make sense to start systematically investing in momentum strategy over a 3-6 month period." 121582702Momentum investing is an aggressive investment style and carries higher risk. Mutual funds manage ₹11,125 crore worth of assets in the Nifty 200 Momentum 30 Index strategy as of April 30, 2025. The Nifty 200 Momentum 30 Index, chooses stocks based on their momentum score which is determined based on its six- and 12-month price returns, after adjusting for its daily price volatility. Stock weights are based on a combination of the stock's normalised momentum score and its free-float market capitalisation with individual stock exposure capped at 5%."The recent underperformance of the momentum strategy provides a good entry point to long term investors," says Sharwan Goyal, head - passive, arbitrage, Quant Strategies, UTI Mutual Fund.“Based on historical trends, periods of underperformance are typically followed by significant outperformance, contributing to its consistent top-tier ranking.” In a bull market, momentum could outperform the broader markets and give far higher returns. “Whenever the broad markets gain 20%, momentum typically returns much more at 1.5-2 times” says Pratik Oswal, head — passives, Motilal Oswal Mutual Fund. Momentum has been one of the best performing strategies in India from a longer-term perspective. Amongst the four factors such as value, quality, momentum and low volatility, momentum has been among the top three performers for 16 out of 20 years. Over a 3-year period, the Nifty 200 Momentum 30 index gained 20.23% every year against the Nifty’s 15.49%. Since April 2005 (since inception), on a 3-year rolling basis, the index has outperformed Nifty 200 Index 85% of times. Oswal expects a broad market recovery in the next three years and expects the momentum strategy to outperform in this period
- News Source Indiatimes (Click to view full news): CLICK HERE
0 Comments:
Leave a Reply