Active momentum funds returned 10.8% over six months vs. 1.8% for the Nifty 500. Performance ranged from 3.7% to 15.2%, exposing the risk of sharp drawdowns in a reversal.
Active momentum funds have outpaced broader market benchmarks across three- and six-month horizons through late July, a stretch marked by sharp volatility. In the three months to July 23, active momentum schemes delivered an average return of roughly 6.4%, beating the Nifty 500 total return index at 1.2% and the Nifty 50 TRI at negative 0.7%.
Over six months, those funds averaged 10.8%, against 1.8% for the Nifty 500 TRI and a negative 4.1% for the Nifty 50. Performance across individual schemes diverged sharply, ranging from 3.7% to 15.2%. The wide spread reflects the different quantitative models and fundamental overlays managers use to capture the momentum factor.
Momentum strategies buy stocks that are rising and exit underperformers. Passive momentum funds track dedicated benchmarks like the Nifty500 Momentum 50 or Nifty200 Momentum 30, which rank stocks on six-month and one-year price performance and rebalance every six months. Active funds deploy proprietary frameworks relying on distinct signals.
Earnings-momentum funds, for instance, prioritize fundamental metrics over pure price trends. ICICI Prudential AMC and Kotak AMC operate active momentum strategies. Some funds evaluate earnings trajectory over the preceding three quarters, blending quantitative data with reviews of corporate developments, media signals, and executive actions. Other funds layer momentum filters on top of a screened stock set, while some combine price momentum with quality or fundamental metrics.
A known weakness of momentum investing is its vulnerability to severe drawdowns during sudden reversals. Active funds use mechanisms to mitigate that risk: tactical hedging, raising cash allocations to regulatory limits, or faster rebalancing schedules.
Financial advisors caution that investors must grasp the risks before committing capital. They warn that active momentum funds remain exposed to sharp losses during market sell-offs unless the framework includes stringent risk controls. Because these strategies are relatively new, advisors recommend letting them build longer track records to judge how well they capture upside while protecting against downside.
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Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.