Nifty 200 Momentum 30 Index

What Is Momentum Investing?

Momentum investing involves a strategy to capitalize on the continuance of an existing market trend. It involves going long stocks, futures or market ETFs showing upward-trending prices and short the respective assets with downward-trending prices. 

Momentum investing holds that trends can persist for some time, and it ’s possible to profit by staying with a trend until its conclusion, no matter how long that may be. For example, momentum investors that entered the U.S. stock market in 2009 generally enjoyed an uptrend until December 2018. 

Another type of momentum investing strategy involves following price-based signals to go long sector ETFs with the strongest momentum, while shorting the sector ETFs with the weakest momentum, then rotating in an out of the sectors accordingly. 

NSE Indices has developed the ‘Nifty 200 Momentum 30 Index’ which aims to track the performance of the top 30 companies within the Nifty 200 Index selected based on their normalized momentum score. 

Methodology: The normalized momentum score for each company is determined based on its 6-month and 12-month price return, adjusted for its daily price volatility. Stock weights are based on a combination of the stock’s normalized momentum score and its free-float market capitalization.

Performance: The Nifty 200 Momentum 30 Index has outperformed the Nifty 200 Index since inception, with an 18.6% CAGR return against 12.7% return for the Nifty 200 Index.

Nifty 200 Momentum 30 Index

Other Details: The Index adapts to changing market conditions and increases the weight to current outperforming sectors – it is currently overweight Consumer Goods and Pharma sectors.

The Nifty 200 Momentum 30 Index is more volatile over long-term horizons. 

Nifty 200 Momentum 30 Index
source: nseindia

Summary:  Investor should have Nifty 50 and Nifty Next 50 as there core portfolio. And those with a high risk appetite can add this to their satellite portion of their portfolio.