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Does momentum investing strategy work?

Momentum investing is ruling the performance charts. Among large-cap equity funds, all index funds tracking Nifty200 Momentum 30 Index Fund have been one of the top performers based on one-year performance. There are 12 schemes focusing on momentum indices in the Indian mutual fund industry which includes Edelweiss Nifty Midcap 150 Momentum 50 Index Fund, a recent addition. Also, Samco Mutual Fund has launched Samco Active Momentum Fund, which is an actively managed equity fund.

Buying stocks that are trending upwards can be a sure way of making money for a few. Among various factors that lead to outperformance in broader markets – quality, value, growth, volatility and momentum, and of late momentum strategies are catching up with investors. The largest and oldest scheme – UTI Nifty200 Momentum 30 Index Fund manages assets worth Rs 2,273 crore. Against this backdrop, let’s see if investing in passively managed smart beta strategies based on momentum pays the investors.

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