These 8 midcap stocks are part of all the three momentum indices
Momentum index funds draw stocks from diversified indices focused on large-cap stocks and from pure mid-cap indices. But, given the criteria of stock-picking, some stocks cross the qualification threshold for more than one momentum index fund
Momentum stock-picking is creeping into Indian mutual funds as investors embrace higher risk to earn extra returns. To check volatility, fund houses have slowly begun to launch ETFs and index funds based on momentum strategy to eliminate fund manager risk. Fund houses take different routes – and therefore, different indices – to pick their baskets of momentum stocks. At present, there are three dedicated momentum-based indices: Nifty 200 Momentum 30 Index and Nifty Midcap150 Momentum 50 Index from the National Stock Exchange and S&P BSE Momentum Index from the BSE. Tracking these three indices are nine passively managed mutual funds. “In momentum investing, the fund manager just looks at the price action and buys stocks that are trending up,” says Prashanth Krishna, founder of Portfolio Yoga. Although their paths are different, eight mid-cap stocks qualify for all three indices.
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The Nifty momentum indices use a normalised momentum score to select constituents, which is based on six-month and 12-month price returns, adjusted for volatility. The constituents of the S&P BSE Momentum index are chosen based on the momentum score computed by dividing the 12-month price change by its volatility. The Nifty 200 Momentum 30 Index choses stocks from the Nifty 200 basket, while the Nifty Midcap150 Momentum 50 Index shortlists 50 stocks from the Nifty Midcap 150 universe. The S&P BSE Momentum index picks 30 stocks from the 250 constituents of the S&P BSE LargeMidcap index. Eight midcap stocks are part of all the three indices. Here is the list. Source: NSE, BSE and Moneycontrol. Portfolio data as of October 31, 2022. Stock return data as of November 10, 2022.
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Indian Hotels Company Sector: Hotels One-year return: 61% Active funds holding the stock: 99
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Hindustan Aeronautics Sector: Diversified One-year return: 86% Active funds holding the stock: 83
