NSE Indices, a subsidiary of NSE, announced the launch of a new strategy index, the Nifty500 Momentum 50. This index aims to capture the performance of the top 50 high-momentum companies within the broader Nifty 500 index.
The Nifty500 Momentum 50 selects companies based on a "Normalized Momentum Score" that considers both their 6-month and 12-month price returns while adjusting for volatility. The weight of each stock in the index is determined by a combination of this momentum score and the company's free-float market capitalization. To prevent excessive concentration, individual stock weight is capped at either 5% or five times its weight based solely on market cap.
The new index is designed to serve as a benchmark for investment managers and a potential underlying asset for passive investment products like Exchange Traded Funds (ETFs), index funds, and structured products. The index will be reconstituted and rebalanced semi-annually, with a base date of 1 April 2005, and a base value of 1000.