Active momentum funds have outpaced broader market benchmarks across three- and six-month horizons—a stretch marked by heightened market volatility. In the three months leading up to 23 July 2026, active momentum schemes delivered an average return of roughly 6.4%, comfortably beating the Nifty 500 total return index (TRI) at 1.2% and the Nifty 50 TRI at negative 0.7%.
Over a six-month basis, these funds generated an average return of nearly 10.8%, compared to 1.8% for the Nifty 500 TRI and a negative 4.1% for the Nifty 50 TRI. However, performance across individual schemes diverged significantly, ranging from 3.7% to 15.2%. This wide performance spread underscores the varied quantitative models and fundamental overlays managers use to capture the momentum factor.
Momentum strategies capitalise on market trends by purchasing ascending stocks while exiting underperforming names. Passive momentum funds execute this systematically by tracking dedicated benchmarks like the Nifty500 Momentum 50 or Nifty200 Momentum 30, which rank equities based on six-month and one-year price performance and rebalance bi-annually. In contrast, active momentum funds deploy proprietary quantitative frameworks that rely on distinct market signals.
For instance, earnings-momentum funds prioritise fundamental metrics over purely technical price trends. Fund managers such as ICICI Prudential AMC and Kotak AMC operate active momentum strategies within this space. Some funds evaluate earnings trajectory across the preceding three quarters, blending quantitative data with qualitative reviews of corporate developments, media signals, and executive actions. Other funds layer quantitative momentum filters directly on top of filtered stocks, while some combine price momentum with underlying quality or fundamental metrics.
A known weakness of momentum investing is its vulnerability to severe drawdowns during sudden market reversals. Active momentum funds employ several mechanisms to mitigate this downside risk, such as tactical hedging, increasing cash allocations to regulatory ceilings, or utilising faster rebalancing schedules.
Financial advisors emphasise that investors must fully grasp the inherent risks before committing capital. They warn that active momentum funds remain susceptible to sharp drawdowns during market sell-offs unless the underlying framework incorporates stringent risk controls. Because active momentum strategies are relatively new to the market, experts recommend allowing these funds to establish longer track records to evaluate how effectively they capture market upside while protecting against downside exposure.
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