NIFTY 100 Alpha 30 Index

Smart Beta based investment styles have gradually garnered traction among the investor cohort. Smart Beta theme revolves around factor-based investing style, an alternative strategy to traditional ‘Market-cap weighted’ strategy.

Popular single & multi factor smart beta products are typically based on factors such as Alpha, Quality, Lowvolatility, Value and Dividend Yield.
 

Methodology:

NIFTY 100 Alpha 30 index measures the performance of top 30 securities with high 'alpha' scores selected from a universe of NIFTY 100 index.

The alpha score for each company is determined based on Jensen's alpha computed using 1 year trailing prices. Jensen’s Alpha for a stock signifies the excess return that the stock has delivered over and above its expected return as measured by the Capital Asset Pricing Model (CAPM).


The weight of each stock in the index is based on the combination of stock’s alpha score and its free float market capitalization. 

NIFTY ALPLHA 30

Performance: 

This smart Beta index strategy which is based on Alpha-factor has historically outperformed the NIFTY 50 and the NIFTY 100 during favorable market conditions.

Calendar year-wise return comparison of NIFTY100 Alpha 30, NIFTY 50 and NIFTY 100 indices.

On overall basis, NIFTY100 Alpha 30 index has outperformed NIFTY 50 and NIFTY 100 in 10 out of 15 calendar years.

NIFTY

Source: NSE India.

Summary:

 
Smart Beta based passive investment styles are increasingly being used by investors across the globe as
building blocks in their asset allocation models in their eternal quest to generate market beating returns.


NIFTY 100 Alpha 30 index, is one such smart beta strategy, which is based on 'Holding onto the recent
performers'. 

The stock selection method and factor tilt based index weighing seeks to capture the performance of companies with high alpha score and is expected to strongly appeal to the investment community looking to align their investment with the alpha based strategy.

Currently there are no ETFs available for this Index. It should generate lot of interest among mutual fund investors, as they are looking for an alternative to active funds.

UTI Mutual Fund to come up with a New Fund Offer (NFO) for Nifty 200 Momentum 30 Index. Indian Markets could see a lot of Index Funds and ETFs for such indices.

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