Motilal Oswal Asset Management Company (MOAMC) has announced the launch of its Momentum FACTOR based ETF and Index Fund - Motilal Oswal Nifty200 Momentum 30 ETF (Exchange Traded Fund) and Motilal Oswal Nifty200 Momentum 30 Index Fund. These are open ended schemes replicating or tracking the performance of Nifty200 Momentum 30 Index.
The momentum factor refers to the tendency of winning stocks to continue performing well in the near term. Globally factor investing and particularly Momentum Factor has caught investor attention over last decade.
Amongst the key attributes of the index is its ability to catch market trends early with dynamic sector rotation which has largely been skewed towards large-caps.
The Nifty200 Momentum 30 index selects top 30 companies with highest 6 month and 12 month ‘momentum’ as defined in index methodology. The constituents need to be part of Nifty 200 index and should also be available for trading in F&O segment with a minimum listing history of one year. The maximum weight of stock is capped at 5 percent and index gets rebalanced semi-annually in June and December.
On a historical basis, Momentum has been one of the best performing factors, generating sizable excess returns. Some of the strongest returns for momentum have traditionally been generated in bull-markets and expansionary business cycles. The Nifty200 Momentum 30 index have outperformed the Nifty 200 TRI on a risk-adjusted returns basis over the last 15 years; in fact the index has outperformed the Nifty 200 TRI in 12 out of last 15 calendar years. The average 3-year Rolling Returns of the Nifty200 Momentum 30 TRI is higher than Nifty 200 TRI by 5.90% at 16.7%.
The NFO will open on January 21, 2022 and closes on February 4, 2022.
Indicative Total Expense Ratio of the funds: For Index Fund Regular: 1.00 percent, Direct: 0.40 percent; for ETF is 0.35 percent. The date of allocation will be February 10, 2022.
In terms of index composition as of December 31, 2021, the top 10 stocks constitutes nearly 50 percent of the Nifty200 Momentum 30 index weight with almost all top 10 stocks with 5 percent cap.
IT dominates with nearly 31 percent sector coverage in the index composition
From the macro-economic sector coverage, IT constitutes 30.7 percent of the overall composition, followed by commodities (19.4 percent), consumer (17.6 percent), financial services (10 percent), utilities (5.6 percent), healthcare (5.1 percent), telecommunications (5 percent), manufacturing (3.1 percent) services (2.8 percent) and energy (0.8percent).
Since December 2017, the IT sector has seen the highest sector exposure by the index.
Nifty200 Momentum 30 Index has largely been skewed towards large-caps
Although historically index has experienced significant sector weight shifts, the historical index composition has been predominantly large caps stocks with index weight in excess of 65% while mid-caps govern rest of the index
Navin Agarwal, MD & CEO, Motilal Oswal Asset Management Company Ltd. said, “Motilal Oswal AMC is one amongst the largest AMC in India in the international funds segment and only fund house to have passive funds across major key segments. With an objective to bring products in accordance to the evolving needs of the investors, we will be introducing a slew of the funds in the factor investing segment. Out first product in this category will be the Motilal Oswal Nifty200 Momentum 30 ETF and Index Fund which will be suitable for investors looking for exposure to factors. We aspire to build unique brand positing by establishing ourselves as a fund house to drive the factor investing category in India.”
Pratik Oswal, Head of Passive Funds, Motilal Oswal Asset Management Company Ltd said, “There have been various theories attempting to explain the momentum effect. Some suggest that it is compensation for bearing high risk; some believe it may be a consequence of market inefficiencies while others believe it is purely because of behavioural biases.”
“As India scripts its economic recovery from the pandemic influenced disruption, businesses are seen planning capex led expansion and overall earnings are expected to be on upward trend. This is expected to channelize bull related market scenario which makes it conducive for Momentum Factor to be the lead performer. We recommend investors to use our momentum focused fund as a satellite allocation approach to enhance their portfolio’s risk-adjusted returns.”
Key things that investors should know about the momentum based investing:
- Exposure to momentum factor
- Takes advantage of irrational investor behaviour
- Works across region, market cap, sector & asset classes time period
- Aim to take advantage of positive upward trending market over long term
- Might experience longer drawdowns and may underperform the benchmark from time to time
The Minimum Application amount For Index Fund is Rs. 500/- and in multiples of Re. 1/- thereafter. On ongoing basis investor can purchase/redeem units of the Scheme through financial advisor or by log-in to www.motilaloswalmf.com
Further, the minimum application amount for ETF is Rs 500/- & in multiples of Re.1/- thereafter. On Exchange – Investors can buy/sell units of the Scheme in round lot of 1 unit and in multiples thereafter; Directly with Mutual Fund – Buy/sell units of the Scheme in unit size of 7,000 units and in multiples thereafter