By Balwant Jain
Return on fairness investing is dependent upon quite a lot of elements. This consists of each macro and micro elements. So far as macros are involved, market contributors would search for particulars like present and potential financial progress, inflation, rate of interest and so forth. to gauge its impression on the economic system and consequently the market. Other than this, micro elements that are firm particular in nature additionally come into play.
Momentum based mostly investing is a mode of investing whereby traders reap advantages by using an present worth development. The selections made on this type of investing is essentially based mostly on technical indicators associated to the worth motion of the inventory of an organization. The target right here is to profit from inventory worth volatility within the quick time period. It’s akin to browsing on the ocean waves. Right here, an investor is crusing up the crest of a wave, solely to leap on to the subsequent wave earlier than the primary one crashes down.
Using the momentum wave
Previous efficiency of the index
The previous efficiency of the index has been very encouraging. Rs. 1 lakh invested within the index throughout June 2005 can be price Rs. 20.51 lakhs as of June 2022.An identical funding in Nifty 50 or Nifty 200 right now can be price Rs. 9.46 lakhs and Rs. 9.77 lakhs respectively. From a 10-year perspective, the index has delivered an annualized return of 19.88% whereas Nifty 50 and Nifty 200 have respectively given an annualized return of 12.94% and 13.44 %.
The Nifty 200 Momentum 30 index enjoys a dividend yield of two% as towards 1.5% and 1.4% for Nifty 50 and Nifty 200 respectively. When it comes to price-to-earnings ratio, the momentum index is nearly at par with Nifty 50 TRI and is decrease than Nifty 200 TRI. In relation to price-to-book, the index fares higher than Nifty 50 TRI and Nifty 200 TRI. (Information as on June 2022).
Spend money on momentum firms with ease
For a lay investor shopping for into every of the businesses within the index individually and rebalancing them when required is a time consuming and tedious course of. So, the best option to go about is to put money into an Change Traded Fund (ETF) or an index fund which relies on the Nifty 200 Momentum 30 Index. Each the ETF and index funds are devices that are designed to copy an underlying index and supply investor the return much like that of the index minus monitoring error and bills.
Since each index fund and ETF qualifies as fairness oriented schemes, any funding in these funds can be thought-about as long run if held for 12 months or extra and income on such models can be taxed at a flat fee of 10% after excluding the preliminary Rs. 1 lakh of long run capital good points accounted for all listed shares and fairness schemes taken collectively. If offered earlier than completion of 12 months, the income can be handled as quick time period capital good points which get taxed at a flat fee of 15%.
To conclude, if you’re an investor with a long run funding orientation and is seeking to capitalize from momentum investing, then these choices be it an index fund or an ETF based mostly on the Nifty200 Momentum 30 index can be an attention-grabbing funding possibility.
(Balwant Jain is a tax and funding skilled and could be reached on email@example.com and @jainbalwant on Twitter.)