If you’re on the lookout for an investment option that combines both innovation and strategy, then the newly launched Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund might just be the right choice. The mutual fund company has come up with this new scheme to offer investors a chance to capitalize on the momentum strategy, which has been a proven winner over the years.
The New Fund Offer (NFO) for this scheme is now open for subscription from 25th September 2024 and will continue till 9th October 2024. Here’s what makes this new fund offer a special opportunity for investors.
What Is the Nifty 200 Momentum 30 Index Fund?
The Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund is an open-ended equity scheme that tracks the performance of the Nifty 200 Momentum 30 Total Return Index (TRI). The idea behind this fund is simple: it selects 30 high-performing stocks out of the Nifty 200 Index, purely based on their momentum. In other words, it targets stocks that are already showing strong upward trends in the market.
This scheme is aimed at providing investors with a low-cost, passive investment strategy with the potential for better returns. The goal is to create a diversified portfolio of stocks that have a good track record of growth while reducing the risk of exposure to smaller, more volatile companies.
How Does Momentum Strategy Work?
The concept of momentum investing revolves around picking stocks that are already performing well and are expected to continue doing so. The idea is that stocks with upward momentum tend to keep rising for some time. Baroda BNP Paribas’ new fund is designed around this principle, offering a unique chance to ride the growth wave of leading stocks in the Indian market.
The fund specifically focuses on the top 30 momentum stocks within the Nifty 200 Index, which includes the largest companies in India by market capitalization. By focusing on companies with high momentum scores, the fund aims to maximize returns while mitigating the risks associated with smaller or volatile companies.
Why Should You Consider This NFO?
- Backed by Strong Performance: The Nifty 200 Momentum 30 Index has a strong history of outperforming the broader market. For example, over the past 15 years, this index has grown at a CAGR (Compound Annual Growth Rate) of 21.85%, compared to just 13.28% CAGR for the Nifty 50. This shows that momentum-based strategies can generate higher returns over the long term.
- Superior Historical Returns: According to data as of August 31, 2024, the Nifty 200 Momentum 30 Index has consistently delivered better returns compared to the Nifty 50 Index. Here’s a comparison of the returns:
- 1-year return: 68.91% (Nifty 200 Momentum 30) vs 32.64% (Nifty 50)
- 3-year return: 25.38% vs 15.17%
- 5-year return: 30.53% vs 19.39%
- 10-year return: 23.04% vs 13.61%
These figures indicate that if you had invested in the Nifty 200 Momentum 30 Index back in April 2005, your investment would have multiplied 46 times, compared to just 15.5 times if you had invested in the Nifty 50 Index. That’s nearly 3x of the returns!
- Low Investment Barrier: You can start investing with as little as Rs 1000, and any additional investments can be made in multiples of Rs 1. This makes it accessible to a broad range of investors, from beginners to seasoned market participants.
- Better Risk Management: While the fund does aim for higher returns, it also takes steps to reduce risk by selecting larger companies with more stability. Smaller companies often come with higher volatility, which this fund avoids by focusing on larger, more established businesses within the Nifty 200.
Key Features of the Baroda BNP Paribas NFO
- Type of Fund: Open-ended equity scheme that tracks the Nifty 200 Momentum 30 Total Return Index.
- Fund Focus: Invests in the top 30 momentum stocks from the Nifty 200 Index.
- NFO Opening Date: 25th September 2024
- NFO Closing Date: 9th October 2024
- Minimum Investment: Rs 1000, and additional investments in multiples of Rs 1.
- Low-Cost Passive Strategy: Benefit from factor-based investing at a low cost while potentially outperforming the broader market.
What Is the Nifty 200 Momentum 30 Total Return Index?
The Nifty 200 Momentum 30 Index is a collection of 30 stocks chosen based on their momentum score from the larger Nifty 200 Index, which itself tracks the top 200 companies in India by market capitalization. The Total Return Index (TRI) aspect means that dividends paid by the stocks are also reinvested, providing even greater compounding returns over time.
Strong Track Record of Outperformance
One of the main reasons to consider investing in this fund is the proven track record of the Nifty 200 Momentum 30 Index. As mentioned earlier, it has consistently outpaced the Nifty 50, delivering significantly higher returns over multiple time frames (1 year, 5 years, 10 years, and 15 years).
The momentum strategy, as back-tested, has shown resilience during various market cycles, making it a reliable choice for long-term wealth creation.
If you’re looking for an investment option that brings together the benefits of passive investing and the potential for better returns, the Baroda BNP Paribas Nifty 200 Momentum 30 Index Fund NFO might just be the right choice. The fund leverages a momentum-based strategy, offering you a unique chance to ride the growth of India’s top-performing stocks with relatively low risk and cost.
Top 10 Stocks
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(Disclaimer: The purpose of this article is only to provide information about the scheme, not to recommend investment. Take any investment decision only after consulting your investment advisor.)
