Motilal Oswal Launches India’s First 500 Momentum 50 Index Fund: A New Chapter in Factor Investing

Introduction:

Motilal Oswal Mutual Fund (MOMF) has unveiled a pioneering investment opportunity with the launch of the Motilal Oswal Nifty 500 Momentum 50 Index Fund. As India’s inaugural 500 Momentum 50 Index Fund, it sets out to capitalize on high-momentum stocks from the broad Nifty 500 universe, offering a novel strategy for investors seeking to tap into dynamic market trends.

Features and Objectives

The Motilal Oswal Nifty 500 Momentum 50 Index Fund, an open-ended index fund, will track the Nifty 500 Momentum 50 Total Return Index. This index comprises stocks demonstrating superior price momentum over the past 6 months to a year. Key aspects of the fund include:

Momentum Strategy: Focuses on stocks that have shown strong recent performance, based on a strategy known to outperform in rising markets.
Diversification: Covers all market capitalization segments—large-cap, mid-cap, and small-cap—offering broad exposure across the Nifty 500.
Historical Performance: The Nifty 500 Momentum 50 Index has delivered remarkable returns, with a 75.2% increase over the past year and a 35.9% rise over the past five years.

Fund Management and Investment Details

The fund will be managed by Swapnil Mayekar and Rakesh Shetty, both seasoned professionals with extensive industry experience. Its investment objective is to mirror the returns of the Nifty 500 Momentum 50 Index, subject to tracking errors. The New Fund Offer (NFO) period runs from September 4, 2024, to September 18, 2024.

Maximize Returns with the Motilal Oswal Nifty 500 Momentum 50 Index Fund:

Market Context and Performance Insights

The Nifty 500 Momentum 50 Index Fund emerges in a landscape where factor investing is gaining traction in India. According to Prateek Agrawal, MD and CEO of Motilal Oswal Asset Management Company, momentum funds are a significant part of the factor investing space, holding a dominant share of INR 10,353 crore out of a total INR 35,954 crore in factor funds as of Q1 FY25.

This underscores the growing appeal of momentum investing, which adapts to trending sectors and leverages dynamic sector rotation to capture market trends early.

Historically, momentum strategies have shown resilience in bull markets and recovery phases, while potentially underperforming during downturns. The Nifty 500 Momentum 50 TRI has notably outperformed the Nifty 50 TRI in 12 of the past 19 years,

illustrating its strength in capturing high-performance stocks across various market conditions. Recent performance highlights include significant outperformance in the mid-cap and small-cap segments, contributing to the index’s robust long-term track record.

Investment Considerations

Investors should be aware that while the fund offers the potential for significant returns by investing in high-momentum stocks, it may also experience higher volatility. The momentum strategy tends to work well during market uptrends but could face challenges during periods of market decline.

Conclusion

The launch of the Motilal Oswal Nifty 500 Momentum 50 Index Fund represents a significant development in the Indian mutual fund landscape. It provides a structured, low-cost way for investors to engage with high-performing stocks across a broad market spectrum. Potential investors should consider their risk tolerance

and investment goals and consult with financial advisors to assess if this fund aligns with their strategies. As factor investing continues to evolve in India, the new index fund by Motilal Oswal is poised to offer unique opportunities for capturing the momentum-driven growth of the Indian equity market.

Frequently Asked Questions FAQ:

What is the Motilal Oswal Nifty 500 Momentum 50 Index Fund?

The Motilal Oswal Nifty 500 Momentum 50 Index Fund is an open-ended index fund that aims to replicate the performance of the Nifty 500 Momentum 50 Total Return Index. This index includes stocks exhibiting the highest momentum based on recent price performance, across large-cap, mid-cap, and small-cap segments within the Nifty 500.

When does the New Fund Offer (NFO) open and close?

The NFO for the Motilal Oswal Nifty 500 Momentum 50 Index Fund opens on September 4, 2024, and closes on September 18, 2024.

What are the key features of this fund?

Momentum Strategy: Invests in stocks that have demonstrated strong performance over the past 6 months and 1 year.
Diversification: Includes stocks from large-cap, mid-cap, and small-cap segments.
Historical Performance: The Nifty 500 Momentum 50 Index has delivered 75.2% returns in the last year and 35.9% over the past five years.
Low-Cost Structure: Provides a cost-effective, rules-based investment approach.

Who will manage the fund?

The fund will be managed by Mr. Swapnil Mayekar and Mr. Rakesh Shetty, who bring significant experience in fund management.

What is the investment objective of the fund?

The fund aims to provide returns that correspond to the total returns of the Nifty 500 Momentum 50 Index, subject to tracking errors.

What is momentum investing and why is it important?

Momentum investing focuses on stocks that have performed well recently with the expectation that they will continue to perform well in the near future. This strategy can offer strong returns during upward market trends, though it may experience higher volatility.

How does this fund differ from other index funds?

Unlike traditional index funds that track broader market indices, this fund specifically targets high-momentum stocks within the Nifty 500, providing targeted exposure to stocks with the strongest recent performance.

What are the historical performance metrics of the Nifty 500 Momentum 50 Index?

The Nifty 500 Momentum 50 Index has achieved a return of 75.2% over the past year and 35.9% over the past five years. It has also outperformed the Nifty 50 Index in 12 of the last 19 calendar years.

What are the risks associated with this fund?

The fund may experience higher volatility compared to broader index funds due to its focus on high-momentum stocks. Momentum strategies can underperform during market downturns or periods of high volatility.

How can I invest in the fund?
- Investors can invest in the Motilal Oswal Nifty 500 Momentum 50 Index Fund during the NFO period through various channels, including online platforms, mutual fund distributors, and financial advisors.
Should I consult a financial advisor before investing?
- Yes, it is advisable to consult with a financial advisor to ensure that this fund aligns with your investment goals, risk tolerance, and overall financial strategy.
What is the minimum investment amount for this fund?
- The minimum investment amount for the Motilal Oswal Nifty 500 Momentum 50 Index Fund will be specified in the NFO offer document. Please refer to the official document or consult with your financial advisor for details.
Will the fund pay dividends?
- The fund’s dividend policy will be outlined in the offer document. Generally, index funds may offer dividends based on the income received from the underlying stocks.
Where can I find more information about the fund?
- For more details, you can visit the Motilal Oswal Mutual Fund website, refer to the NFO offer document, or contact customer service for further inquiries.
How can I track the performance of the fund?
- The performance of the fund can be tracked through the Motilal Oswal Mutual Fund website, financial news platforms, or by contacting the fund’s customer service. Performance reports and updates will also be published periodically.

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