What is Nifty 500 Momentum 50 Index: Constituents, Methodology & Sector Allocation?

The stocks that have qualified in the above 2 criteria are next ranked on the basis of their normalised momentum scores. The normalised momentum score of each stock is calculated on the basis of their 6-months and 12-months price return, adjusted for volatility.

The weight of individual stocks featured on the Nifty 500 Momentum 50 Index is arrived at based on the tilt weight methodology. In the case of this momentum index, the weight of each stock is determined by combining the momentum score of the stock with the free-float market capitalization. The maximum weight of any individual stock featured on the Nifty 500 Momentum 50 Index is capped at the lower of 5% or 5 times the weight of the stock on the index based on only the free-float market capitalization.

This decreases the potential concentration risk and reduces the dependence of the overall index on the performance of any individual stock. Moreover, a buffer based on normalized momentum score ranks is additionally applied in order to reduce turnover of stocks featured in the Nifty 500 Momentum 50 Index.

Note:The above data of the Nifty 500 Momentum 50 Index is quoted as per 31 July, 2024.

As you can see, 9 out of the top 10 stocks ranked by weight on this index belong to the large cap category. This large cap bias of the Nifty 500 Momentum 50 Index can help reduce the short-term volatility in performance of this index.

As you can see, while well-diversified, two key sectors that feature the highest weight in the Nifty 500 Momentum 50 Index are capital goods (32.57%) and financial services (17.27%).

Those who plan to invest in this index fund should however keep in mind that past returns of the Index do not guarantee future performance. So returns of the index may not be maintained at the same level in the future. This holds true even in the case of passively managed schemes such as the Max Life Nifty 500 Momentum 50 Fund that mirrors this strategy index.

If your investment needs match, you should definitely consider adding Nifty 500 Momentum 50 Index-based passive investments either via an Exchange Traded Fund (ETF) or an Index Fund as part of your investment portfolio.