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NEW DELHI: IDFC Mutual Fund is scheduled to launch Nifty200 Momentum 30 Index Fund, an open-ended index scheme that will consist of 30 high momentum large and mid-cap stocks replicating the Nifty200 Momentum 30 Index, on Friday.

The new fund offer (NFO) for IDFC Nifty200 Momentum 30 Index Fund opens 19 August and will close on 26 August.

The fund manager of the scheme would be Nemish Sheth and there will be no exit load on redemption of units.

The minimum investment during the NFO period would be 5,000 and in the multiples of Re 1, thereafter.

The basic premise of momentum investing is that stocks that have outperformed recently, basis price movement, may continue to outperform, and vice versa.

Additionally, the Nifty200 Momentum 30 Index aims to capture the swift movement across stocks and sectors.

According to the scheme note, the relatively higher weight in the defensive FMCG sector stocks during the first six months of the calendar year 2020 helped cushion the impact of pandemic-related sell-off across the rest of the portfolio.

The same period witnessed a change in market leadership with healthcare stocks outperforming; the momentum index adapted to this change at the time of the next rebalancing and increased its exposure to stocks in this sector.

Vishal Kapoor, CEO, IDFC AMC, said, “Momentum investing has proven to be a highly rewarding factor strategy over the last several years. It has also outperformed the broader indices, for instance, the Nifty200 Momentum 30 Index has outperformed the Nifty 100, and Nifty 200 indices in 8 out of the last 10 calendar years. It follows a structured, quantitative-led process of buying securities when their price is rising, and importantly, selling them when prices appear to have peaked."

Top sectors by weight in Nifty200 Momentum 30 index are consumer discretionary (25.9%), utilities (14.4%), energy (13.1%), industrials (13%) and commodities (12.6%).

Top stocks by weight are Adani enterprises (5.4%), Titan (5.3%), Sun Pharmaceutical (5.2%), ITC (5.1%), NTPC (5%).

“Historically, returns per unit of risk for the momentum index have been higher than broader indices. The diversification offered through this differentiated investment style, through a cost-efficient Index Fund, makes our fund an attractive opportunity for smart, long-term equity investors," Kapoor said.

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