Momentum funds: A friend that can quickly become your foe

Momentum mutual funds are a relatively new category. Like all novelty, it's exciting! But is it much ado about nothing? Let's see. For the curious, momentum investing is a strategy that focuses on the premise of 'buy high and sell higher'. In this scenario, investors want to buy stocks that would continue to move up and sell them before they start performing poorly. The surge in equity markets in 2021 and the initial first few months of 2022 led mutual fund houses to pursue momentum investing. As a result, fund houses have launched 11 momentum funds since 2022, and interestingly, all of them are passive funds. (Samco is launching the first active momentum mutual fund - the NFO is until June 29 - but that story is for another day). Since all momentum funds, barring Samco's, track either the Nifty 200 Momentum 30 index or the Nifty Midcap 150 Momentum 50 index, we wanted to understand how these indices work and then gauge these funds' performance. How m