Tata Nifty Midcap 150 Momentum 50 Index Fund is an open-ended scheme monitoring NIFTY Midcap 150 Momentum 50 Index. The fund is at present in its NFO interval (4th to seventeenth Oct 2022). On this article, we analyse the efficiency of the underlying index.
The Nifty Midcap150 Momentum 50 Index tracks the efficiency of the highest 50 corporations inside the Nifty Midcap 150 chosen primarily based on their Normalized Momentum Rating. The Normalized Momentum Rating for every firm is set primarily based on its 6-month and 12-month value return, adjusted for volatility. Supply: Index factsheet.
- Base date: 1st April 2005
- This can be a custom-built index and was launched solely on Aug sixteenth 2022. So it has no buying and selling historical past
- The burden of the inventory within the index is derived by multiplying the free float market cap by the Normalized Momentum Rating of that inventory.
- The index is re-balanced on a semi-annual foundation utilizing knowledge ending the final buying and selling day of Might and November.
- Shares ought to have a minimal itemizing historical past of 1 12 months on the deadline.
- Non – F&O shares inside Nifty Midcap 150 are ineligible for inclusion if the overall situations of the inventory hitting the higher or decrease circuit (value band) through the previous six months as of the deadline is greater than or equal to twenty% of the variety of complete buying and selling days over the identical interval.
Calculations (Supply: NSE Index methodology doc)
- Normalized Momentum Rating =
(1+ Weighted Common Z rating) if Weighted Common Z rating >=0
(1- Weighted Common Z rating) ^-1 if Weighted Common Z rating < 0 - Weighted Common Z Rating = 50% * (12-month Momentum Z Rating) + 50%
* (6-month Momentum Z Rating) - The 12 – month Momentum Z rating for every inventory is calculated as per
the next system: [MR12 – μMR,12]/ σMR,12- MR12 is the 12-month Momentum Ratio of the inventory
- µMR,12 is the imply of the 12-month Momentum Ratios of the eligible
universe - σMR,12 is the std. deviation of the 12-month Momentum Ratios of the
eligible universe - The 6 – month Momentum Z rating for every inventory is outlined equally.
- 12-month Momentum Ratio (MR12) = 12-month Value return / σp
- 12-month value return (12 M return): [Price (M-1)/Price (M-13)]-1
The place M is the rebalancing month, and costs are as of the final
buying and selling day of M-1 Month and M-13 Month - Std.Deviation (σp): Annualised normal deviation of lognormal
each day returns of the inventory for one 12 months - The 6-month Momentum Ratio is outlined equally.
- 12-month value return (12 M return): [Price (M-1)/Price (M-13)]-1
We had already mentioned the principle traits of a momentum index. When the market is transferring up, momentum shines. When the market goes down or goes nowhere, momentum struggles. See: UTI Nifty200 Momentum 30 Index Fund: Who ought to make investments? We must always count on comparable traits from Tata Nifty Midcap 150 Momentum 50 Index Fund.
The evolution of the index from 1st Aug 2018 is proven beneath.
- The 2 excessive ovals point out occasions when there was(is) no momentum available in the market. As anticipated, the Nifty Midcap 150 Momentum 50 Index doesn’t do properly.
- The center oval exhibits the market restoration after the March 2020 crash. The momentum index was not a clear outperformer even throughout such a time.
- The disappointing present of the standard index can be seen. See: DSP Nifty Midcap 150 High quality 50 Index Fund Assessment
The 2 bear market areas proven above are expanded within the graphs beneath.
Anybody trying to put money into Tata Nifty Midcap 150 Momentum 50 Index Fund ought to recognise that this fund will underperform the Nifty Midcap 150 index for a number of months every now and then.
The momentum index 3Y return is commonly corresponding to the opposite indices indicated within the 3Y rolling return chart beneath.
This may persist even over 5Y every now and then.
It is just over 7Y and 10Y that the momentum and high quality index manages to outperform. Nonetheless, even the backtested historical past is lower than a decade and the precise traded historical past a lot shorter.
Do you have to put money into Tata Nifty Midcap 150 Momentum 50 Index Fund? Our advice is not any. The index is simply too unstable and could be fairly irritating to carry. The bills – which ought to be a lot larger than a mid cap or nifty subsequent 50 index fund – will additional improve this frustration. There may be not sufficient historical past to imagine the chance vs reward steadiness in all fairness beneficial over the long run.
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