Stocks With Multiple Faces! Common Names Across Smart-Beta MFs
A Moneycontrol personal finance study shows that different smart-beta funds can have common stocks. It implies that these stocks possess the characteristics of different factors
In India, smart beta indices work around multiple factors like low volatility, alpha, quality, value, equal weighing and momentum. These funds pick up broad market indices and overlay them with factors with a view to outperform them over the long term. NSE India has launched 34 such factor/strategy-based indices. Each smart beta index has a unique way of shortlisting stocks from their parent indies. For instance, the constituents of Nifty 200 Quality 30 index are shortlisted from the basket of Nifty 200 by applying the quality filters, such as return on equity (ROE), Debt to Equity (D/E) ratio and EPS growth variability. But did you know that there could be common stocks across multiple factors?
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A Moneycontrol personal finance study on stocks, part of the 5 major factor indices, shows that 8 stocks are common among those three and more different factor indices. In other words, these stocks possess the characteristics of different factors. For instance, ITC is part of the four factor indices – Momentum, Alpha, Low volatility and Quality. Indices considered for the study are Nifty 200 Momentum 30 index (Momentum), Nifty Alpha 50 index (Alpha), Nifty Low Volatility 50 index (Low Volatility), Nifty 200 Quality 30 index (Quality) and Nifty 500 value 50 index (Value). Value as of July 31, 2023. Source: Niftyindices.com and ACEMF.
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ITC M-CAP type: Large Cap No. of active schemes that hold the stocks as of July 2023: 224
