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Nifty 500 Momentum 50 Index

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

There are many reasons why a stock price witnesses a sudden rise – better earnings prospects, a regulatory change that favors the company, a change in management, etc. While it is ideal to buy such a stock before such news reaches the general public, it might not always be possible. However, there is an existing investment strategy that identifies and inve

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In Unit Linked Policies, the investment Risk in the investment portfolio is borne by the policyholder.

What is the Nifty 500 Momentum 50 Index?

The Nifty 500 Momentum 50 Index is a strategy index. This index tracks the performance of 50 stocks that have the highest normalised momentum scores among the 500 stocks featured in the broad-based Nifty 500 Index. The parent Nifty 500 index comprises 100 large cap stocks, 150 midcap stocks and 250 small cap stocks listed on the National Stock Exchange.

As the 50 stocks that comprise this index are drawn from the broad-based Nifty 500 Index, they can belong to either the large cap, midcap or small cap segment. As a result, this index features diversification across various market capitalisation. Additionally, the high momentum score of these 50 stocks provides this index the potential to deliver high returns in the long-term.

Also Read: Nifty Midcap 150 Momentum 50 Index

How are the Nifty 500 Momentum 50 Index Stocks Selected?

There are 2 key conditions that a stock needs to fulfill in order to be included in the Nifty 500 Momentum 50 Index:

The stock needs to be part of the Nifty 500 Index.

Stocks in the Nifty 500 that have low liquidity are automatically disqualified.

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.

What are the top constituent stocks of the Nifty 500 Momentum 50 Index?

While the Nifty 500 Momentum 50 Index is diversified across market caps, the weight of individual stock is partly dependent on the free-float market capitalization of the stock. So, many of the stocks with the highest weight on the index belong to the large-cap category. The individual weight of key stocks featured on the Nifty 500 Momentum 50 Index are shown below:

Company Name	Weight (%)
Trent Ltd.	5.18
Adani Ports and Special Economic Zone Ltd.	5.11
Bharat Electronics Ltd.	4.84
Bajaj Auto Ltd.	4.74
Mahindra & Mahindra Ltd.	4.74
REC Ltd.	4.44
Siemens Ltd.	4.36
Hindustan Aeronautics Ltd.	4.34
Power Finance Corporation Ltd.	4.01
Tata Power Co. Ltd.	3.69

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.

What are the Different Sectors Featured on Nifty 500 Momentum 50 Index?

The Nifty 500 Momentum 50 Index is based on the sector agnostic selection criteria of momentum score. As a result, this strategy index features a high degree of sectoral diversification. So investments made into schemes tracking this index can help in portfolio diversification through asset allocation across multiple industries and sectors. The key sectors featured on this momentum index along with their weight looks like this as of 31 July, 2024:

Sector	Weight (%)
Capital Goods	32.57
Financial Services	17.27
Automobile and Auto Components	13.75
Power	10.54
Consumer Services	5.18
Services	5.11
Consumer Durables	3.36
Construction	3.14
Metals & Mining	2.58
Oil, Gas & Consumable Fuels	2.08
Healthcare	1.66
Realty	1.65
Chemicals	1.10

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%).

What are the Short and Long Term Returns of Nifty 500 Momentum 50 Index

The Nifty 500 Momentum 50 Index has yielded higher returns in the short term compared to the long term. Based on the data recorded as of 11 July 2024, the returns of this index over various time periods are as below:

Short and Long Term Returns of the Nifty 500 Momentum 50 Index
1 Year Returns	82.00%
3 Year Returns	35.00%
5 Year Returns	34.00%
10 Year Returns	25.40%

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.

Who Should Consider Investing in the Nifty 500 Momentum 50 Index?

Investing in the Nifty 500 Momentum 50 Index may be considered suitable for investors who are:

Seeking long-term growth of their investments

Looking to benefit from momentum investing strategy

Opting for passively managed schemes over actively managed schemes

Seeking diversification of their investment portfolio across sectors and market capitalisations

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.

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What Is the Nifty Midcap 150 Momentum 50 Index: Constituent Stocks, Key Sectors and Historical Returns?

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