Momentum funds with 4x rise in assets in a year a 'long-term option' for now

Mumbai: Robust returns in the past year, low expense ratio, and rule-based stock picking without any fund manager bias is enticing investors to momentum strategies.

Assets under management of momentum-oriented equity mutual funds surged more than fourfold to ₹15,147 crore in August 2024, from ₹3,500 crore in September 2023, with investors allocating capital to a mix of active and passive momentum schemes. Rich investors also allocated money to momentum strategies in portfolio management schemes (PMS).

"A momentum strategy has no human bias and intervention which attracts investors," said Arihant Bardia, chief investment officer, Valtrust.


Momentum-based smart beta investing involves stock selection and weighting based on the momentum factor, rather than market capitalisation, used for commonly tracked indices like the Nifty 50. The Nifty 200 Momentum 30 Index Fund, the most popular index amongst mutual fund investors, selects top 30 stocks from the Nifty 200 based on their Normalised Momentum Score (NMS).

Over the last one and three years, the Nifty 200 Momentum 30 Index Fund, returned 66.2% and 24.76%. respectively, outpacing the Nifty 50 returns of 34.78% and 14.70% respectively in the same period. The Nifty 200 Momentum 30 TRI has outperformed the Nifty 200 TRI in 13 out of the last 18 financial years.

While the Nifty 200 Momentum 30 fund is the most popular one with investors as it is large-cap oriented, there are schemes that are mid-cap oriented such as the Nifty Midcap 150 Momentum 50 Index and multicap oriented like the Nifty 500 Momentum 50 Index. There are also actively managed momentum funds, and actively managed funds Samco Active Momentum and Quant Momentum Mutual Fund, where the fund manager has the flexibility to build portfolios based on proprietary models.

However, wealth managers believe momentum investment could take a backseat in the coming days.