Nippon India Mutual Funds has launched a new investment option, the Nippon India Active Momentum Fund, which follows a momentum-based strategy.
This open-ended fund is currently available for investment through its New Fund Offer (NFO), open until 24th February.
After this period, the fund will reopen for continuous sale and repurchase starting 6th March.
What Makes This Fund Unique?
A Rule-Based, Disciplined Investment Approach
This fund follows a disciplined, rule-based strategy, which reduces emotional decision-making and bias.
It focuses on essential stock characteristics such as alpha, low volatility, quality, value, and growth.
The main strategy revolves around the ‘momentum’ factor— the tendency of a stock’s price to continue in the same direction once it starts moving.
Momentum as the Core Strategy
The momentum approach works on the idea that assets that perform well tend to keep performing well, while poor performers may continue to lag. Historically, momentum-driven indices have shown strong returns.
For example, the Nifty 500 Momentum 50 Index has outperformed the Nifty 500 in 13 of the last 19 years, with significantly higher cumulative returns in most years.
Risks and Investment Details
Understanding the Risks of Momentum Investing
While momentum investing has proven successful, it may face challenges during critical market events, like the early days of the COVID-19 pandemic or the global financial crisis.
To mitigate risks, this fund combines both technical factors (price momentum) and fundamental factors (earnings revisions) to maintain a balanced approach.
Investment and Fund Management Details
The minimum investment for this NFO is Rs 500, with additional investments in multiples of one rupee.
The fund is managed by Ashutosh Bhargava and Kinjal Desai, and its benchmark is the Nifty 500 TRI.
