As the pioneer of India’s first actively managed momentum fund in 2023, how do you see momentum as a strategy for retail investors today?
Momentum works best in a risk-on market; when everything is rising, it tends to generate the highest alpha, according to back-tested data. However, our active momentum approach also aims to perform in falling markets by protecting capital, which helped us outperform some peers recently as we weren’t fully equity invested. Momentum is a high-risk, high-return strategy, so beginners should start with a small allocation and stay invested for 5-10 years. Historically, indices like the Nifty 500 Momentum 50 have shown a very high probability of beating the benchmark over such periods. In the short term, however, momentum can underperform due to its high volatility and beta.
