In the dynamic world of investing, choosing the right strategy can significantly impact your long-term financial goals.
Three popular approaches stand out among investors: Momentum, Quality, and Value. Each of these strategies serves a unique role in delivering market returns, driven by different philosophies and methodologies.
Momentum focuses on stocks with upward price trends, Quality emphasizes financially sound companies with robust earnings, and Value targets undervalued companies . But which of these strategies truly holds the potential for long-term growth and stability?
This guide will compare these indices, breaking down how they work, their strengths, and their historical performance, so you can choose the approach that best aligns with your investment goals.
Whether you’re an experienced investor or just exploring index strategies, this article will provide the insights needed to make an informed decision.
Average Returns comparision for Nifty 500 Value 50, NIFTY500 Multicap Momentum Quality 50, and Nifty500 Momentum 50 Indexes Against Nifty 500 TRI Benchmark
1-Year Performance: In the short-term 1-year timeframe, the Nifty 500 Value 50 index led with an impressive 63.10% return, significantly outperforming the Nifty 500 TRI benchmark at 37.01%.
This strong performance highlights the potential of value-oriented stocks in capturing rapid gains, especially during favorable market conditions.
The Nifty500 Momentum 50 also showed considerable growth at 60.82%, while the NIFTY500 Multicap Momentum Quality 50 index followed with 55.46%, still well above the benchmark.
This period reflects a favorable environment for both value and momentum strategies, showcasing their ability to capture short-term market movements.
3-Year Performance: Over 3 years, Nifty 500 Value 50 maintained a substantial lead with a 34.47% return, compared to 15.95% from the Nifty 500 TRI.
The Nifty500 Momentum 50 returned 23.91%, and the NIFTY500 Multicap Momentum Quality 50 index returned 21.27%. This period demonstrates that both value and momentum strategies continue to provide substantial outperformance, with Value 50 excelling due to its focus on undervalued stocks that may have appreciated.
5-Year Performance: In the 5-year timeframe, Nifty 500 Value 50 and Nifty500 Momentum 50 had close returns of 33.95% and 31.93%, respectively, while NIFTY500 Multicap Momentum Quality 50 delivered 28.33%.
The Nifty 500 TRI lagged behind with 19.89%. Here, the data suggests that momentum and quality factors are able to maintain returns over a more extended period, while Value 50’s focus on undervalued stocks continues to be beneficial.
7-Year Performance: Over 7 years, the NIFTY500 Multicap Momentum Quality 50 and Nifty500 Momentum 50 indexes each delivered returns of 22.13% and 22.11%, respectively, demonstrating stability in the mid-term, while the Nifty 500 Value 50 fell slightly to 15.89%, near the Nifty 500 TRI’s 15.17%.
This reflects the effectiveness of quality and momentum factors in maintaining competitive performance.
10-Year Performance: In the long-term 10-year timeframe, the Nifty500 Momentum 50 outperformed with a 22.39% return, followed closely by the NIFTY500 Multicap Momentum Quality 50 at 21.46%.
Both indexes surpassed the Nifty 500 TRI’s 14.31%. This highlights the momentum strategies’ ability to capitalize on sustained trends over long periods.
Nifty 500 Value 50 vs. Momentum 50 and Multicap Quality 50 : Which Index Outshines in Rolling Returns?
The Nifty 500 Value 50, NIFTY500 Multicap Momentum Quality 50, and Nifty 500 Momentum 50 indices have been backtested by NSE starting from April 1, 2005.
To gain insights into their performance, we will calculate the rolling returns for these index funds from 2005 up to November 2024. This analysis will help us understand how each index has performed over different timeframes, providing a clear picture of their consistency, volatility, and growth potential across nearly two decades.
Nifty 500 Value vs. Momentum vs Multicap Quality 50
1-Year rolling retutrns Analysis
In the 1-year period:
- Nifty 500 achieved an average return of 17.30% with a maximum return of 118.55% and a minimum return of -59.78%. Its standard deviation of 13.08% indicates relatively lower volatility compared to other indices in this analysis, and it has a Sharpe ratio of 0.8413, which measures risk-adjusted returns.
- Nifty 500 Momentum 50 provided a higher average return of 28.04% with a maximum of 157.90% and a minimum of -66.58%, though it had higher volatility with a standard deviation of 19.97%. Its COB of 74.96% suggests a high probability of outperforming the Nifty 500, and its Sharpe ratio of 1.0887 reflects strong risk-adjusted returns.
- NIFTY500 Multicap Momentum Quality 50 delivered 25.99% on average, with a maximum of 124.92% and minimum of -57.24%. With a 17.57% standard deviation, it was moderately volatile, and its COB of 76.46% indicates a good chance of beating the market. The Sharpe ratio of 1.1207 makes it the top performer on a risk-adjusted basis.
- NIFTY500 Value 50 recorded a 24.16% average return and the highest maximum return of 188.88%. However, it also had high volatility with a 21.79% standard deviation and a relatively low COB of 56.02%. Its Sharpe ratio of 0.8195 is lower, suggesting that while returns can be high, the risk involved is significant.
In the 1-year period, Momentum and Multicap Momentum Quality indexes outperformed both the Nifty 500 and Value index on a risk-adjusted basis, though they involved higher volatility.
3-Year Rolling Returns Analysis
- Nifty 500: The average return over 3 years is 13.18%, with a maximum of 38.31% and a minimum of -9.46%. The standard deviation of 13.61% indicates moderate volatility, and the Sharpe ratio is 0.5056, showing limited risk-adjusted returns.
- Nifty 500 Momentum 50: With an average return of 21.25%, the index outperforms Nifty 500. It has a higher maximum return (66.62%) but also experiences higher volatility (19.89% standard deviation). The COB (Chance of Beating) is 84.20%, indicating strong consistency, and a Sharpe ratio of 0.7517.
- NIFTY500 Multicap Momentum Quality 50: This index has an average return of 21.18%, comparable to Momentum 50 but with a slightly lower maximum (43.22%) and less volatility (18.05%). Its COB of 91.36% and Sharpe ratio of 0.8244 make it attractive for risk-adjusted returns.
- NIFTY500 Value 50: The Value 50 index has an average return of 17.86%, lower than both Momentum indices. Its standard deviation is 19.96%, reflecting higher risk, and the COB is 53.12%, indicating a lower probability of outperformance. The Sharpe ratio is 0.5793, suggesting moderate risk-adjusted returns.
5-Year Rolling Returns Analysis
- Nifty 500: The average return is 12.82%, with a maximum of 23.56% and minimum of -1.54%. Its volatility is 19.06%, and the Sharpe ratio is low at 0.3419, suggesting limited compensation for risk.
- Nifty 500 Momentum 50: This index shows a higher average return of 20.55%, a maximum of 36.25%, and a lower minimum (-4.39%). With a COB of 96.84% and a Sharpe ratio of 0.6659, it offers attractive long-term returns but comes with higher risk.
- NIFTY500 Multicap Momentum Quality 50: The average return of 21.46% and positive minimum return of 4.35% reflect consistent performance. It has lower volatility (19.03%) and a high COB of 100%, making it ideal for stable growth. The Sharpe ratio of 0.7964 further supports its risk-adjusted strength.
- NIFTY500 Value 50: With an average return of 14.71% and high volatility (26.53% standard deviation), the Value 50 index shows less consistency, as indicated by its COB of 53.38%. Its Sharpe ratio of 0.3168 suggests moderate returns for the risk taken.
10-Year Rolling Returns Analysis
- Nifty 500: The average return over 10 years is 12.80%, with a maximum of 18.05% and minimum of 4.98%. Its standard deviation is 16.70%, with a Sharpe ratio of 0.3891, showing stable but lower returns for long-term investors.
- Nifty 500 Momentum 50: With a solid average return of 21.01%, this index outperforms Nifty 500. Its maximum is 28.34%, and minimum 11.18%, reflecting consistent performance. A COB of 100% and Sharpe ratio of 0.7399 demonstrate superior risk-adjusted returns.
- NIFTY500 Multicap Momentum Quality 50: This index has the highest average return at 21.79%, with a maximum of 27.68% and minimum of 14.71%. Its standard deviation is 17.22%, and with a COB of 100% and the highest Sharpe ratio of 0.8998, it presents the most balanced risk-return profile.
- NIFTY500 Value 50: The Value 50 index has an average return of 14.05%, a maximum of 23.63%, and minimum close to zero. Its standard deviation is the highest (24.67%), indicating volatility, and the Sharpe ratio is only 0.3139, making it a riskier option with moderate returns.
Conclusion: 1, 3, 5, 7, and 10-Year Rolling Returns
In summary, NIFTY500 Multicap Momentum Quality 50 consistently provides the highest risk-adjusted returns across various timeframes, making it ideal for long-term, risk-aware investors. For those seeking higher growth, Nifty 500 Momentum 50 is another strong choice, though with slightly increased risk. The Nifty 500 Value 50 lags due to higher volatility, suitable for risk-tolerant, value-focused investors.
Nifty 500 Value vs. Momentum vs Multicap Quality 50 Yearly Returns Compared with Nifty 500 TRI
2006: Momentum led with a remarkable 60.27%, followed by Nifty 500 at 36.16%, Quality at 29.42%, and Value at 14.09%.
2007: Momentum continued to outperform with a 128.93% return. Quality and Nifty 500 achieved 65.02% and 64.58% respectively, with Value at 109.01%.
2008: A challenging year for all indices, with Quality having the least loss at -55.15%, while Momentum faced the steepest drop at -64.20%.
2009: A strong recovery year led by Value at 133.05%, with Quality at 97.27% and Nifty 500 at 90.96%.
2010: Value topped again with 30.93%, closely followed by Quality at 30.57%. Nifty 500 trailed at 15.27%.
2011: Negative returns for all; Nifty 500 was the least impacted at -26.40%, while Value suffered the most at -37.72%.
2012: Momentum led with 51.57%, while Quality and Nifty 500 followed at 37.93% and 33.48% respectively.
2013: Quality achieved 27.85% returns, with Momentum at 12.82%, while Value faced a decline at -13.99%.
2014: Quality soared with 110.48%, outpacing Momentum at 92.11% and Nifty 500 at 39.30%.
2015: Quality and Momentum showed resilience at 13.28% and 11.28%, while Value ended in negative at -7.17%.
2016: Value was the top performer with 25.07%, while Quality lagged at -3.86%.
2017: Momentum again outshone others with 69.51%, with Quality at 58.83%.
2018: Nifty 500 saw the smallest loss at -2.14%, while Value faced a sharper decline at -26.17%.
2019: Quality and Nifty 500 held steady with 9.06% and 8.97% respectively, while Value declined -13.70%.
2020: Quality posted a strong return of 29.71%, with Momentum and Nifty 500 following at 20.97% and 17.89%.
2021: Momentum led with 78.85%, while Quality was close at 61.79%.
2022: Value returned 23.16%, outperforming Momentum and Quality, which both declined.
2023: Momentum ranked highest at 47.71%, with Quality achieving 57.89%.
2024: Momentum retained a lead at 32.32%, with Quality and Nifty 500 trailing.
Conclusion: Over the years, Momentum and Quality indices generally demonstrated stronger performance, particularly in bullish periods. Value tended to perform well during recoveries but was more volatile.
Final Conclusion :
The performance analysis of Nifty 500 Value, Quality, and Momentum indices highlights distinct advantages in different market cycles. Momentum and Quality strategies excel in bull markets, capturing high growth and outperforming other indices. In bear markets, Quality often cushions losses better, thanks to its focus on financially strong companies.
Value, although more volatile, shines during recovery periods, making it an attractive choice for long-term rebounds.
Across bull, bear, and sideways markets, these index funds collectively demonstrate resilience and growth potential, making them valuable wealth creators over the long term. By diversifying across strategies, investors can navigate market fluctuations while building wealth steadily over time.
