Your Questions Answered: What are pros and cons of investing in Nifty MidSmallcap400 Momentum Quality 100 Index?
Pradeep Simha, Hyderabad, Telangana The Nifty MidSmallcap400 Momentum Quality 100 Index, is a strategic index that has been designed to track the performance of stocks that exhibit both momentum and quality characteristics. The Nifty MidSmallcap400 Momentum Quality 100 Index is a subset of the Nifty MidSmallcap 400 Index, which includes mid and small-cap stocks.
The unique aspect of this index is its focus on companies that not only have strong momentum in terms of price performance but also display high-quality attributes. This combination aims to provide a balanced approach to stock selection, potentially leading to better risk-adjusted returns for investors.
Momentum is measured by the 6-month and 12-month price returns of stocks, adjusted for volatility. This ensures that the index captures the performance of stocks that have shown a consistent upward trajectory in their prices.
On the other hand, quality is assessed through a company's return on equity (ROE), financial leverage (debt-to-equity ratio), and earnings growth variability over the past five years. These factors are indicative of a company's operational efficiency, financial stability, and growth prospects.
Also Read: Your Questions Answered: What is the difference between mutual funds tracking Nifty Bank Index and Nifty PSU Bank Index? The index methodology involves a semi-annual reconstitution in June and December, where stocks are evaluated and selected based on their composite momentum-quality score and free-float market capitalization.
This process ensures that the index remains up-to-date with the most promising mid and small-cap stocks in the market. Momentum indices are essentially indices that take into account the price movement of the stocks,
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