Motilal Oswal AMC launches Nifty200 Momentum 30 ETF and Index Fund
Motilal Oswal Asset Management Company (MOAMC) has launched new fund offer of momentum factor based ETF and Index Fund – Motilal Oswal Nifty200 Momentum 30 ETF (Exchange Traded Fund) and Motilal Oswal Nifty200 Momentum 30 Index Fund. These are open ended schemes tracking the performance of Nifty200 Momentum 30 Index.
The Nifty200 Momentum 30 index selects top 30 companies with highest 6 month and 12 month ‘momentum’ as defined in index methodology. The constituents need to be part of Nifty 200 index and should also be available for trading in F&O segment with a minimum listing history of one year. The maximum weight of stock is capped at 5% and index gets rebalanced semi-annually in June and December.
Momentum simply means that stocks the prices of which are trending upwards, keep going up in near term. Globally factor investing and particularly momentum factor has caught investor attention over last decade. The index in question focuses on momentum stocks in the large cap stocks. On a historical basis, momentum has been one of the best performing factors, generating sizable excess returns. Some of the strongest returns for momentum have traditionally been generated in bull-markets and expansionary business cycles. The Nifty200 Momentum 30 index have outperformed the Nifty 200 TRI on a risk-adjusted returns basis over the last 15 years; in fact the index has outperformed the Nifty 200 TRI in 12 out of last 15 calendar years. The average 3-year Rolling Returns of the Nifty200 Momentum 30 TRI is higher than Nifty 200 TRI and stand at 16.7%.
The NFO will close on February 4, 2022.
Pratik Oswal, Head of Passive Funds, Motilal Oswal Asset Management Company Ltd said, “There have been various theories attempting to explain the momentum effect. Some suggest that it is compensation for bearing high risk; some believe it may be a consequence of market inefficiencies while others believe it is purely because of behavioural biases.”
UTI Mutal Fund has launched India’s maiden index fund tracking Nifty200 Momentum 30 Index. The scheme was launched in March 2021 and has given 36.9% returns. Over last one month it has been at the bottom of the performance charts with 0.6% returns compared to 5.06% returns offered by S&PBSE 100 TRI. This underlines the inherently risky nature of the strategy focused on momentum.
The fund house has advised investors to use this strategy as satellite allocation, as it can see large drawdowns and periods of under-performance.
ENDS