The momentum strategy of investing follows a ‘buy high and sell higher’ approach. It involves buying securities which are exhibiting strong price momentum, with a view that the momentum would persist in the future. Currently, 11 of the 13 schemes that follow the momentum strategy are passively managed. Within these, nine track the Nifty 200 Momentum 30 Index (NM30) as their benchmark, and two schemes track the Nifty Midcap150 Momentum 50 Index. There are two active momentum funds from SAMCO and Quant mutual funds (MF).
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Though momentum investing can be rewarding in the long run, it might not outperform all factors through the year. Within the single-factor based indices, the momentum strategy has outperformed the low volatility and quality indices, but underperformed the value and alpha indices in 2023. Paras Matalia, Fund Manager, SAMCO Mutual Fund, says, “The year 2023 witnessed an upswing in prices, especially post April. Momentum strategies, in general, have delivered almost double the standard free-float index returns. Microcaps, smallcaps, and some midcaps have done better. Defence, railway, PSU, and capital goods sector stocks have hugely outperformed their peers.”
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The Nifty 200 Momentum 30 Index comprises 30 stocks that are selected from the Nifty 200 basket based on the momentum score calculated from their recent six and 12-month price returns, adjusted for volatility. In its latest semi-annual rebalancing exercise in December 2023, NSE replaced 16 of these stocks, 12 of which are midcaps. Here are the midcap stocks added to the NM30 basket in December 2023. Source: ACEMF and https://www.niftyindices.com
