Active Momentum Funds Outperform Indices with 10.8% Gains

Active momentum mutual funds have delivered significant outperformance, with average gains nearing 10.8% over the six months ending July 23, 2026. These funds notably surpassed both the Nifty 50 and Nifty 500 indices during this period.

Key Performance Figures

• Six-month returns (ending July 23, 2026):
• Active Momentum Funds: 10.8%
• Nifty 500 TRI: 1.8%
• Nifty 50 TRI: negative 4.1%
• Three-month returns (ending July 23, 2026):
• Active Momentum Funds: 6.4%
• Nifty 500 TRI: 1.2%
• Nifty 50 TRI: 0.7% decline

These active momentum funds differentiate themselves from passive counterparts by employing diverse investment models. Their strategies include focusing on earnings momentum, integrating fundamental analysis, or prioritizing pure price signals.

Diverse Investment Models

• Earnings Momentum: Utilized by ICICI Prudential AMC and Kotak AMC, identifying companies with consistent earnings improvement.
• Fundamental Analysis: Motilal Oswal integrates frameworks like QGLP (quality, growth, longevity, and price) with price-momentum filters.
• Pure Price Signals: Funds from Samco, Union, and NJ Momentum Fund focus on price trends, with varying degrees of rule-based or discretionary execution.

Managers of these active funds often work with a broader investment universe, sometimes encompassing up to 750 stocks, which facilitates faster portfolio rebalancing. However, momentum investing inherently carries the risk of sharp losses during sudden market reversals.

Downside Risk Management

• Hedging: Samco AMC employs hedging through futures contracts or reduces net equity exposure.
• Cash Holdings: Union AMC increases cash positions during periods of weak market momentum.
• Daily Monitoring: Motilal Oswal monitors portfolios daily to enable rapid exits if price trends weaken.

Despite these mitigation strategies, they are not foolproof; earnings-based models, for instance, may struggle in sideways markets. As these active momentum schemes are relatively new to the Indian market, their long-term performance across a full market cycle remains untested.

Investors considering these products must carefully evaluate each fund’s specific model and ensure it aligns with their personal risk tolerance. Future performance will depend on the manager’s ability to navigate volatile market phases and maintain liquidity during portfolio rebalancing.