The frequent notion is that the index funds have minimal portfolio churn and a decrease turnover ratio. However what if the index that they’re mimicking itself churns its elements by greater than 65% each time? By their development, the index funds monitoring such an index additionally must do the identical, resulting in excessive portfolio turnover.
In regards to the writer: Vishal is a Chartered Accountant and a SEBI-registered flat-fee solely monetary advisor. You possibly can study extra about him and his providers through his web site, Bachhat (www.bachhat.cash). He’s a part of fee-only India.
Funds monitoring Nifty500 Momentum 50 Index:
One among such classes is funds monitoring the Nifty500 Momentum 50 Index. In its final two constituent updates, this index modified greater than 65% of its holdings every time and a whopping 94% over a interval of 1 12 months. That is approach greater than most actively managed. Earlier than going deeper into this, allow us to first perceive a bit extra concerning the Nifty500 Momentum 50 Index.
What’s Nifty500 Momentum 50 Index and the way is it constituted and rebalanced periodically?
As per NiftyIndices web site, “The Nifty500 Momentum 50 Index tracks the efficiency of fifty shares that are chosen primarily based on normalized momentum rating from the Nifty 500 index. The momentum rating for every firm is set primarily based on its 6-month and 12-month worth return, adjusted for volatility. The burden of every inventory within the index relies on the mixture of inventory’s momentum rating and its free float market capitalization.” (1)
In plain language, the highest 50 shares ranked primarily based on their momentum rating over 6- and 12-month interval out of the Nifty500 universe kinds a part of the Nifty500 Momentum 50 Index (known as Momentum 50 Index hereinafter). The person inventory weights are capped on the decrease of 5% or 5 occasions the load of the inventory within the Nifty500 index. The Momentum 50 Index is reconstituted (or rebalanced) semi-annually in June & December. The next are a number of of the standards primarily based on which reconstitution is carried out (2):
- First one is clear. Any inventory transferring out of the Nifty500 can be faraway from this index.
- If the rating of any inventory already a part of the Momentum 50 Index is throughout the prime 75, then they’re retained.
- If the rating of any inventory already a part of the Momentum 50 Index is past the highest 75, then they’re excluded and changed by the subsequent greatest shares primarily based on their momentum rating.
- High 25 ranked shares from Nifty500 Index, and which aren’t already a part of the Momentum 50 Index, are added, changing the inventory with the bottom momentum rating.
Current reconstitutions of the Nifty500 Momentum 50 Index:
For our evaluation, we now have began with the shares forming a part of the Momentum 50 Index as of 1st July 2024 and analysed the influence of modifications within the index resulting from its reconstitution on 31st Dec 2024(3) and 30th June 2025(4). Here’s a fast abstract:
| No. of firms out of fifty nonetheless forming a part of the Momentum Index | 3 Corporations |
| No. of firms eliminated on 31st Dec 2024 | 39 Corporations |
| No. of firms eliminated on 30th Jun 2025 | 8 Corporations |
As might be seen from above, solely 3 firms out of the unique 50 firms proceed to be a part of the Momentum 50 Index as of 30th June 2025, and a whopping 47 firms (94%) have been eliminated inside 12 months. Out of the 47 firms, 39 firms (78%) had been eliminated inside 6 months.
Right here is the reconstitution abstract of the Momentum 50 Index for 31st Dec 2024 and 30th June 2025:
| 31st December 2024 | 30th June 2025 | |
| No. of firms retained (A) | 11 | 16 |
| No. of firms excluded (B) | 39 | 34 |
| No. of firms added (C) | 39 | 34 |
| Retention Ratio (A/50) | 22% | 32% |
| Exclusion Ratio (B/50) | 78% | 68% |
Out of fifty firms, 39 firms had been eliminated on the time of index reconstitution on 31st Dec 2024, and 11 had been retained. Equally, 34 firms had been eliminated throughout reconstitution on 30th June 2025, and 16 had been retained. Because the whole variety of firms within the Momentum 50 Index must be 50, these firms had been changed with an equal variety of firms.
This isn’t the kind of change one expects in an index fund each 6 months.
High 5/10 Shares within the Momentum Index:
Because the weightage of particular person shares could differ within the index, allow us to analyse whether or not these modifications are just for low-weightage shares or for higher-weightage shares too.
The weightage-wise constituent isn’t available for historic information, and therefore I’ve used the portfolio of Motilal Oswal Nifty500 Momentum 50 Fund, which is a primary such fund launched on 24th September 2024(5). Allow us to see the influence on its 10 prime holdings as of 30th Sept 2024 by reconstitution carried out on 31st December 2024 and 30th June 2025 respectively:
| Sr. No. | Firm Title | Weightage as of | ||
| thirtieth Sept 2024 | thirty first Dec 2024 | thirtieth Jun 2025 | ||
| 1 | Trent Restricted | 6.7% | 5.0% | 0.0% |
| 2 | Bajaj Auto Restricted | 6.0% | 0.0% | 0.0% |
| 3 | Mahindra & Mahindra Restricted | 5.0% | 5.0% | 0.0% |
| 4 | Adani Ports and SEZ Restricted | 4.7% | 0.0% | 0.0% |
| 5 | Siemens Restricted | 4.4% | 2.8% | 0.0% |
| 6 | Bharat Electronics Restricted | 4.4% | 0.0% | 0.0% |
| 7 | Tata Energy Firm Restricted | 3.9% | 0.0% | 0.0% |
| 8 | Hindustan Aeronautics Restricted | 3.9% | 0.0% | 0.0% |
| 9 | REC Restricted | 3.8% | 0.0% | 0.0% |
| 10 | Suzlon Power Restricted | 3.6% | 0.0% | 0.0% |
| Complete | 46.4% | 12.8% | 0.0% | |
As might be seen from the desk, solely 3 out of the highest 10 shares continued within the Momentum 50 Index after its revision on 31st Dec 2024, and none of them had been a part of the Index in its subsequent revision on 30th June 2025.
Key Takeaway:
One of many key takeaways from the above evaluation is that not all Index funds are equal in all traits. Sure indexes, as a substitute of blindly replicating the index, use methods to generate an alpha vis-à-vis the Index’s return. They will have considerably greater turnover, at occasions greater than actively managed funds. Apart from the truth that they mimic the index, these funds are not any completely different from another lively funds out there. These are fancy funds and are greatest prevented from being part of one’s portfolio.
Disclaimer: This isn’t monetary recommendation, and the readers ought to attain out to registered funding advisors for any monetary recommendation. Registration granted by SEBI, membership of BASL and certification from Nationwide Institute of Securities Markets (NISM) on no account assure efficiency of the middleman or present any assurance of returns to buyers. Funding in securities market are topic to market dangers. Learn all of the associated paperwork fastidiously earlier than investing.
Sources:
- https://www.niftyindices.com/indices/fairness/strategy-indices/nifty500–momentum–50
- https://www.niftyindices.com/Methodology/Method_NIFTY_Equity_Indices.pdf
- https://nsearchives.nseindia.com//net/websites/default/information/2024-12/ind_prs11122024_0.pdf
- https://nsearchives.nseindia.com//net/pressrelease/2025-06/ind_prs06062025_20250606183553.pdf
- https://www.motilaloswalmf.com/obtain/scheme-portfolio-details
Do share this text with your mates utilizing the buttons beneath.
Use our Robo-advisory Device to create an entire monetary plan! ⇐Greater than 3,000 buyers and advisors use this! Use the low cost code: robo25 for a 20% low cost.Plan your retirement (early, regular, earlier than, and after), in addition to non-recurring monetary objectives (comparable to little one schooling) and recurring monetary objectives (like holidays and equipment purchases). The device would assist anybody aged 18 to 80 plan for his or her retirement, six different non-recurring monetary objectives, and 4 different recurring monetary objectives with an in depth money stream abstract.
🔥You can too avail large reductions on our programs and the freefincal investor circle! 🔥& be part of our neighborhood of 8000+ customers!
Observe your mutual funds and inventory investments with this Google Sheet!
We additionally publish month-to-month fairness mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility inventory screeners.
You possibly can comply with our articles on Google Information
We now have greater than 1000 movies on YouTube!
Be part of our WhatsApp Channel
Podcast: Let’s Get RICH With PATTU! Each single Indian CAN develop their wealth!
You possibly can watch podcast episodes on the OfSpin Media Pals YouTube Channel.
🔥Now Watch Let’s Get Wealthy With Pattu தமிழில் (in Tamil)! 🔥
- Do you could have a remark concerning the above article? Attain out to us on Twitter: @freefincal or @pattufreefincal
- Have a query? Subscribe to our publication utilizing the shape beneath.
- Hit ‘reply’ to any e-mail from us! We don’t provide customized funding recommendation. We will write an in depth article with out mentioning your title when you’ve got a generic query.
Be part of 32,000+ readers and get free cash administration options delivered to your inbox! Subscribe to get posts through e-mail! (Hyperlink takes you to our e-mail sign-up type)
About The Writer
Dr M. Pattabiraman(PhD) is the founder, managing editor and first writer of freefincal. He’s an affiliate professor on the Indian Institute of Know-how, Madras. He has over 13 years of expertise publishing information evaluation, analysis and monetary product improvement. Join with him through Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You might be wealthy too with goal-based investing (CNBC TV18) for DIY buyers. (2) Gamechanger for younger earners. (3) Chinchu Will get a Superpower! for youths. He has additionally written seven different free e-books on varied cash administration matters. He’s a patron and co-founder of “Price-only India,” an organisation selling unbiased, commission-free aum impartial funding recommendation.
Our flagship course! Study to handle your portfolio like a professional to realize your objectives no matter market situations! ⇐ Greater than 3,500 buyers and advisors are a part of our unique neighborhood! Get readability on plan on your objectives and obtain the mandatory corpus irrespective of the market situation is!! Watch the primary lecture without spending a dime! One-time cost! No recurring charges! Life-long entry to movies! Scale back worry, uncertainty and doubt whereas investing! Learn to plan on your objectives earlier than and after retirement with confidence.
Enhance your earnings by getting individuals to pay on your abilities! ⇐ Greater than 800 salaried staff, entrepreneurs and monetary advisors are a part of our unique neighborhood! Learn to get individuals to pay on your abilities! Whether or not you’re a skilled or small enterprise proprietor who needs extra shoppers through on-line visibility or a salaried individual wanting a aspect earnings or passive earnings, we are going to present you obtain this by showcasing your abilities and constructing a neighborhood that trusts and pays you! (watch 1st lecture without spending a dime). One-time cost! No recurring charges! Life-long entry to movies!
Our e-book for youths: “Chinchu Will get a Superpower!” is now accessible!
Most investor issues might be traced to a scarcity of knowledgeable decision-making. We made unhealthy choices and cash errors once we began incomes and spent years undoing these errors. Why ought to our kids undergo the identical ache? What is that this e-book about? As dad and mom, what wouldn’t it be if we needed to groom one capacity in our kids that’s key not solely to cash administration and investing however to any facet of life? My reply: Sound Determination Making. So, on this e-book, we meet Chinchu, who’s about to show 10. What he needs for his birthday and the way his dad and mom plan for it, in addition to instructing him a number of key concepts of decision-making and cash administration, is the narrative. What readers say!
Should-read e-book even for adults! That is one thing that each father or mother ought to educate their youngsters proper from their younger age. The significance of cash administration and choice making primarily based on their needs and desires. Very properly written in easy phrases. – Arun.
Purchase the e-book: Chinchu will get a superpower on your little one!
The right way to revenue from content material writing: Our new book is for these fascinated by getting aspect earnings through content material writing. It’s accessible at a 50% low cost for Rs. 500 solely!
Do you need to test if the market is overvalued or undervalued? Use our market valuation device (it’ll work with any index!), or get the Tactical Purchase/Promote timing device!
We publish month-to-month mutual fund screeners and momentum, low-volatility inventory screeners.
About freefincal & its content material coverage. Freefincal is a Information Media Group devoted to offering unique evaluation, stories, critiques and insights on mutual funds, shares, investing, retirement and private finance developments. We accomplish that with out battle of curiosity and bias. Comply with us on Google Information. Freefincal serves greater than three million readers a 12 months (5 million web page views) with articles primarily based solely on factual info and detailed evaluation by its authors. All statements made shall be verified with credible and educated sources earlier than publication. Freefincal doesn’t publish paid articles, promotions, PR, satire or opinions with out information. All opinions shall be inferences backed by verifiable, reproducible proof/information. Contact info: To get in contact, use this contact type. (Sponsored posts or paid collaborations is not going to be entertained.)
Join with us on social media
Our publications
You Can Be Wealthy Too with Objective-Based mostly Investing
Printed by CNBC TV18, this e-book is supposed that can assist you ask the correct questions and search the proper solutions, and because it comes with 9 on-line calculators, you can even create customized options on your way of life! Get it now.
Gamechanger: Overlook Startups, Be part of Company & Nonetheless Dwell the Wealthy Life You Need
This e-book is supposed for younger earners to get their fundamentals proper from day one! It’ll additionally enable you to journey to unique locations at a low value! Get it or present it to a younger earner.
Your Final Information to Journey
That is an in-depth dive into trip planning, discovering low cost flights, funds lodging, what to do when travelling, and the way travelling slowly is best financially and psychologically, with hyperlinks to the net pages and hand-holding at each step. Get the pdf for Rs 300 (on the spot obtain)
