NJ Momentum Factor 100 Portfolio

One of the concerns when using momentum is the propensity of a moving stock to “recoil” sharply when it reaches a turning point.

The most popular way of overcoming this is to use a lag between the time when momentum is studied and when it is acted upon. This allows the “recoil”, if it happens, to manifest and lower the acquisition cost of the stock.

In developing our momentum indicator, we studied various time periods between 1 and 12 months of standalone and comparative momentum. We studied these both with and without different lag periods from 5 days to 1 month. We also studied various holding periods for our resultant portfolio ranging from 3 to 12 months. In studying these, transaction costs were incorporated into the process to allow for a robust comparison of the outcomes achieved.

Our current methodology provides a balance between managing portfolio churn, factor decay and scalability.

The NJ Momentum 100 Portfolio, an equal-weighted portfolio of 100 stocks, is constructed by tilting the float-adjusted capitalisation-weighted Nifty 500 TRI, the parent index, towards 100 constituents with highest ranks based on our momentum methodology.

  3M Momentum (%) 6M Momentum (%) 9M Momentum (%)
NJ Momentum 100 Portfolio 11.19% 9.73% 13.25%
Nifty 500 TRI 8.91% 8.02% 5.76%
  • Source: Internal research, Bloomberg, National Stock Exchange
  • Factor parameters calculated as on 31st August 2022.
  • For Nifty 500 & NJ Momentum 100 Portfolio factor definitions are the average of its constituents.
  • Momentum is defined as the total return of price of the securities for their respective time period.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Momentum 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

NJ Momentum 100 Portfolio vs Nifty 500 TRI - 10yrs Returns

  • Source: Internal research, Bloomberg, National Stock Exchange of India
  • 10-Yr CAGRs are calculated for the period 30 September 2002 to 31st August 2022 and have been rolled on a daily basis.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Momentum 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

As the charts indicate, momentum has been a consistent outperformer across various time periods which make it one of the most important factors in India. Since it offers the widest range of options to calculate and determine its presence, implementations of momentum differ very widely across the world and even within India. Combined with its fickle nature, the search for the most efficient and consistent way to measure momentum promises to be a long one.

NJ Momentum 100 Portfolio vs Nifty 500 TRI - CAGR

  • Source : Internal research, Bloomberg, National Stock Exchange of India
  • CAGRs are calculated as the average CAGR based on the rolling CAGRs (rolled daily) calculated for the respective holding periods i.e. 1, 3, 5, and 10-Yr rolling CAGRs. The period for calculation is 30 September 2002 to 31 August 2022.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Momentum 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

 NJ Momentum 100 Portfolio vs Nifty 500 TRI - Return/Standard Deviation

  • Source: Internal research, Bloomberg, National Stock Exchange of India
  • The Return/Standard Deviation ratios have been calculated by dividing the respective rolling returns (rolled daily) by the standard deviation of the corresponding rolling returns, calculated over the period 30 September 2002 to 31 August 2022.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Momentum 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.

NJ Momentum 100 Portfolio vs Nifty 500 TRI - Maximum Drawdown

  • Source: Internal research, Bloomberg, National Stock Exchange of India
  • The Drawdown for a specific date has been calculated by dividing that day’s NAV of NJ Momentum 100 Portfolio and Nifty 500 TRI by their peak NAVs up to that date, respectively.
  • Past performance may or may not be sustained in future and is not an indication of future return.
  • NJ Momentum 100 Portfolio is a proprietary methodology developed by NJ Asset Management Private Limited. The methodology will keep evolving with new insight based on the ongoing research and will be updated accordingly from time to time.
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