Soon after a string of new fund offers (NFOs) were launched by several asset management companies ever since SEBI lifted its restrictions on July 1, ICICI Prudential too rolled out its fund schemes. One of them is Nifty 200 Momentum 30 ETF and the second is Nifty 200 Momentum 30 Index Fund.
The stocks in the schemes will be added based on the high normalised momentum score. The weight is derived by multiplying the free float market cap with the normalised momentum score of that stock.
The schemes will follow momentum investing which is a strategy that aims to capitalise on the continuance of existing trends in the market. It follows certain risk management rules to address volatility and other hidden traps that reduce profits.
Momentum investing seeks to take advantage of market volatility by taking short-term positions in stocks going up and selling them as soon as they show signs of going down. The investor then moves the capital to new position.
It involves a strict set of rules based on technical indicators that dictate market entry and exit points for particular securities. It is possible to earn profit by staying with a trend until its conclusion regardless of how long that may be.
Stock eligibility criteria
Stocks that will be shortlisted will be a part of the Nifty 200 index at the time of review. Constituent stocks should have a minimum listing history of one year and stock should be available for trading in derivative segment (F&O) as on the effective date.
Then 30 stocks are selected from the Nifty 200 index based on their momentum score. Once the stocks are shortlisted, stock weights are based on a combination of the stock's normalised momentum score and its free-float market capitalisation. The index rebalancing will be done on a semi-annual basis in June and December.
Top ten holdings based on their normalised momentum score are Reliance Industries, NTPC, ONGC, ITC, Mahindra and Mahindra, Adani Enterprises, Power Grid, Bharti Airtel, Sun Pharma and Tata Motors.
The index is overweight on metals, consumer services, chemicals, power and capital goods.
Nifty 200 Momentum 30 ETF: Minimum contribution is of ₹1,000 and in multiples of Re 1. The fund managers are Kayzad Eghlim and Nishit Patel. The benchmark of the fund is Nifty 200 Momentum 30 TRI. The fund units will be allotted on August 8, 2022.
Nifty 200 Momentum 30 index fund: The minimum application is ₹5,000. The fund managers of the scheme are Kayzad Eghlim and Nishit Patel. Investors can choose daily, weekly, fortnightly and monthly SIPs.