Index funds that bet on alpha, with low volatility… And stocks they love to hold
Nifty Alpha Low-Volatility 30 Index selects stocks from NIFTY 100 and NIFTY Midcap 50 that delivered notable return in long run while exhibiting low volatility
There are two passive funds, one from ICICI Prudential mutual fund and another from Nippon India mutual fund, track the benchmark --‘Nifty Alpha Low-Volatility 30 Index’, which is a smart beta index that follows a multi-factor stock selection approach. The Index tracks performance of 30 stocks, selected from baskets of NIFTY 100 and NIFTY Midcap 50. A single factor-based strategy typically exhibits cyclicality and may underperform during certain market phases which can be mitigated by selecting stocks based on a combination of multiple factors. This index combines the strategy of growth and low volatility while selecting stocks. Here, a stock’s growth or outperformance is measured by Jensen’s alpha while low volatility is measured by calculating the inverse of the standard deviation of the price movement. Performance as measured by the 5-year rolling return calculated from the last 15 years’ data shows that Nifty Alpha Low-Volatility 30 TRI gave a compounded annualized return of 19 percent while Nifty 50 TRI generated 12 percent. Though the index selects stocks also from NIFTY Midcap 50, only two mid-cap stocks -- Page Industries and Alkem Laboratories are part of the index currently. Here are the top ten holding of the Nifty Alpha Low-Volatility 30 Index. The weightage of the stocks was based on the portfolio of the ICICI Pru Nifty Alpha Low - Volatility 30 ETF. Data as of November 2022. Source: ACEMF.
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Nestle India Weightage: 4.6% Sector: Consumer Non Durables Active equity schemes that held the stock: 73
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Britannia Industries Weightage: 4.6% Sector: Consumer Non Durables Active equity schemes that held the stock: 82
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Sun Pharmaceutical Industries Weightage: 4.3% Sector: Pharmaceutical Active equity schemes that held the stock: 252
