Index funds that bet on alpha, with low volatility… And stocks they love to hold

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.

Nestle India
Weightage: 4.6%
Sector: Consumer Non Durables
Active equity schemes that held the stock: 73

Britannia Industries
Weightage: 4.6%
Sector: Consumer Non Durables
Active equity schemes that held the stock: 82

Sun Pharmaceutical Industries
Weightage: 4.3%
Sector: Pharmaceutical
Active equity schemes that held the stock: 252

ITC
Weightage: 4.0%
Sector: Consumer Non Durables
Active equity schemes that held the stock: 204

NTPC
Weightage: 3.9%
Sector: Power
Active equity schemes that held the stock: 195

Bharti Airtel
Weightage: 3.8%
Sector: Telecom - Services
Active equity schemes that held the stock: 295

Larsen & Toubro
Weightage: 3.8%
Sector: Construction Project
Active equity schemes that held the stock: 286

ICICI Bank
Weightage: 3.7%
Sector: Banks
Active equity schemes that held the stock: 397

Titan Company
Weightage: 3.6%
Sector: Consumer Durables
Active equity schemes that held the stock: 147

SBI Life Insurance Company
Weightage: 3.6%
Sector: Finance
Active equity schemes that held the stock: 184