Momentum investing is making a strong comeback on the Indian stock market, clocking a powerful three-month rally after nearly 15 months of tepid returns.

In the three months to 30 June, the momentum factor—which focuses on stocks showing strong upward price trends—outpaced all other factor investment styles, including value, low volatility, and quality. According to National Stock Exchange (NSE) data, the Nifty 500 Momentum 50 index surged 17.29% during this period. In comparison, the Quality index grew by 16.07%, Value by 7.89%, and Low Volatility by 5.52%.

Momentum investing delivered stellar returns in 2023 and 2024, when the index rose 47.7% and 27.2%, respectively, according to NSE data. However, performance weakened in 2025, with the index declining 7.5%.

The recent resurgence indicates that despite a broader market slowdown, certain sectors continue to outperform, with momentum capital actively chasing these pockets of growth.

“Momentum is a factor that typically performs well during bull markets or when markets exhibit a strong and persistent trend. If momentum is doing well in the current scenario, it means certain segments or stocks are showing sustained outperformance,” said Siddharth Srivastava, head of ETF products and fund manager at Mirae Asset Investment Managers (India). “Apart from large caps and certain segments like IT and FMCG, others have done relatively better and that is what momentum has been able to capture,” Srivastava added.

“Momentum does well when market volatility increases gradually from a low base. It also outperforms during periods where fear is high, leading to high volatility,” said Rohit Tandon, senior fund manager at Kotak Mahindra Mutual Fund.

"During 2025, momentum underperformed as markets were affected by tariffs and geopolitical conflicts. This led to sudden and sharp volatility jumps rather than a gradual increase," Tandon said.

Momentum and its risks

Stocks that have delivered strong returns over 6 and 12 months are typically considered momentum stocks. Fund managers rank these stocks based on their ‘momentum score’, which is derived from their six-month and 12-month returns, and adjusted for volatility. The stocks with the highest scores are added to the portfolio.

In other words, momentum investing involves holding stocks that are already rising in an attempt to benefit from further potential gains. However, the strategy can also face sharp drawdowns when market trends reverse or during broad corrections. For instance, when the Lok Sabha elections results were declared on 4 June 2024, the market experienced a sharp drawdown, with the Nifty 50 index closing 5.93% lower. The Nifty 500 Momentum 50 index fell 10.82% that day.

“Momentum funds can see sharp drawdowns when trends reverse or markets turn sideways, so investors need to be prepared for periods of underperformance,” said Abhishek Kumar, founder of SahajMoney and a Sebi-registered investment adviser.

"These products are best suited for experienced investors with high risk tolerance and a long-term horizon, and should ideally be part of a satellite portfolio rather than the core portfolio," Kumar added.

In contrast to momentum, quality factor investing focuses on fundamentally strong companies characterized by low debt, high return on capital, and robust cash flows. Value factor investing involves picking companies that are currently undervalued and trade at lower price-to-earnings (P/E) multiples, while low-volatility factor investing involves choosing companies that have relatively small price swings.

Outperformance over 3 and 5 years

Viraj Gandhi, chief executive at Samco Mutual Fund, said, “Momentum’s recent rebound is not entirely surprising, as prolonged underperformance is difficult for a strategy that has historically delivered around 20% CAGR.”

He highlighted that momentum investing has outperformed other investing styles over three and five years. A daily rolling-return analysis by Gandhi illustrated momentum's dominant performance over three and five years.

Over a three-year rolling period, momentum outpaced the benchmark by 7.8%—the highest among all factors. In comparison, value outperformed the benchmark by 5.96%, followed by quality at 3.65% and low volatility at 3.09%. This outperformance persisted over a five-year rolling horizon as well, where momentum led the pack by beating the benchmark by 7.72%. In comparison, value outperformed the benchmark by 4.06% quality by 3.73% and low volatility by 2.91%.

Momentum investing is making a strong comeback on the Indian stock market, clocking a powerful three-month rally after nearly 15 months of tepid returns.

In the three months to 30 June, the momentum factor—which focuses on stocks showing strong upward price trends—outpaced all other factor investment styles, including value, low volatility, and quality. According to National Stock Exchange (NSE) data, the Nifty 500 Momentum 50 index surged 17.29% during this period. In comparison, the Quality index grew by 16.07%, Value by 7.89%, and Low Volatility by 5.52%.

Momentum investing delivered stellar returns in 2023 and 2024, when the index rose 47.7% and 27.2%, respectively, according to NSE data. However, performance weakened in 2025, with the index declining 7.5%.

The recent resurgence indicates that despite a broader market slowdown, certain sectors continue to outperform, with momentum capital actively chasing these pockets of growth.

“Momentum is a factor that typically performs well during bull markets or when markets exhibit a strong and persistent trend. If momentum is doing well in the current scenario, it means certain segments or stocks are showing sustained outperformance,” said Siddharth Srivastava, head of ETF products and fund manager at Mirae Asset Investment Managers (India). “Apart from large caps and certain segments like IT and FMCG, others have done relatively better and that is what momentum has been able to capture,” Srivastava added.

“Momentum does well when market volatility increases gradually from a low base. It also outperforms during periods where fear is high, leading to high volatility,” said Rohit Tandon, senior fund manager at Kotak Mahindra Mutual Fund.

"During 2025, momentum underperformed as markets were affected by tariffs and geopolitical conflicts. This led to sudden and sharp volatility jumps rather than a gradual increase," Tandon said.

Momentum and its risks

Stocks that have delivered strong returns over 6 and 12 months are typically considered momentum stocks. Fund managers rank these stocks based on their ‘momentum score’, which is derived from their six-month and 12-month returns, and adjusted for volatility. The stocks with the highest scores are added to the portfolio.

In other words, momentum investing involves holding stocks that are already rising in an attempt to benefit from further potential gains. However, the strategy can also face sharp drawdowns when market trends reverse or during broad corrections. For instance, when the Lok Sabha elections results were declared on 4 June 2024, the market experienced a sharp drawdown, with the Nifty 50 index closing 5.93% lower. The Nifty 500 Momentum 50 index fell 10.82% that day.

“Momentum funds can see sharp drawdowns when trends reverse or markets turn sideways, so investors need to be prepared for periods of underperformance,” said Abhishek Kumar, founder of SahajMoney and a Sebi-registered investment adviser.

"These products are best suited for experienced investors with high risk tolerance and a long-term horizon, and should ideally be part of a satellite portfolio rather than the core portfolio," Kumar added.

In contrast to momentum, quality factor investing focuses on fundamentally strong companies characterized by low debt, high return on capital, and robust cash flows. Value factor investing involves picking companies that are currently undervalued and trade at lower price-to-earnings (P/E) multiples, while low-volatility factor investing involves choosing companies that have relatively small price swings.

Outperformance over 3 and 5 years

Viraj Gandhi, chief executive at Samco Mutual Fund, said, “Momentum’s recent rebound is not entirely surprising, as prolonged underperformance is difficult for a strategy that has historically delivered around 20% CAGR.”

He highlighted that momentum investing has outperformed other investing styles over three and five years. A daily rolling-return analysis by Gandhi illustrated momentum's dominant performance over three and five years.

Over a three-year rolling period, momentum outpaced the benchmark by 7.8%—the highest among all factors. In comparison, value outperformed the benchmark by 5.96%, followed by quality at 3.65% and low volatility at 3.09%. This outperformance persisted over a five-year rolling horizon as well, where momentum led the pack by beating the benchmark by 7.72%. In comparison, value outperformed the benchmark by 4.06% quality by 3.73% and low volatility by 2.91%.