Investing in a single factor can be painful due to cyclicality of the factors. Individual factor based portfolios may underperform the market in short term. Please refer the paper “Factor Performance Across Different Macroeconomic Regimes in India” by Akash Jain & Priscilla Luk for details.
Attaching the following images from their research paper which shows the best performing factors in different economic regimes.
Another issue with NSE strategic indices is they are launching only selected indices. S&P BSE has launched the four strategic indices based on same underlying universe, number os stocks, weighting schemes. So, it is easier to compare and create the multi factor portfolio. On NSE I don’t see Nifty Midcap 150 VALUE 50 & Nifty Midcap Low Volatility 30. Same is with other factors and stock universe. Looking at the available indices, we have to consider survivorship bias, overfitting.
Individually The Midcap 150 Quality 50 index looks good but we have to keep in mind the above mentioned survivorship bias, overfitting and probable short term underperformance.
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