Axis Momentum Fund Unveiled: Ride the Market Trends!

Axis Mutual Fund has launched Axis Momentum Fund, it is an open-ended equity scheme following the momentum theme.

Momentum investing in India is gaining attention as an attractive strategy for those looking to capitalize on market trends. In 2024, with India's robust economic growth and evolving sector dynamics, investors are increasingly considering momentum-based strategies.

Investors are moving beyond traditional market-cap-based strategies to adopt factor-based funds for potentially higher risk-adjusted returns. Momentum mutual funds are indeed popular, and their appeal lies in their ability to deliver superior returns by identifying and riding market trends.

[Read: Momentum Investing: All You Need to Know About Momentum Mutual Funds]

The Axis Momentum Fund NFO adds to the growing list of momentum-based mutual funds in India. The fund focuses on sectors and stocks that exhibit strong performance momentum, aiming to generate high returns by investing in high-growth, high-momentum companies.

What will be the investment strategy for Axis Momentum Fund?

Axis Momentum Fund aims to provide long-term capital growth from an actively managed diversified portfolio of equity & equity-related securities of companies that exhibit strong momentum.

Momentum investing is essentially based on owning a portfolio of securities that have shown favourable price trends across different time horizons. Momentum strategy could be based on various parameters including price, growth and/or return signals.

The first step of the fund's investment process commences with liquidity analysis and data availability. Thereafter various qualitative and quantitative screeners may be applied to exclude companies that, the fund manager believes, does not meet the criteria of quality.

Once the universe is finalized, the in-house proprietary quantitative model to rank stocks based on momentum will be used. The quantitative model calculates the momentum score using any one or more metrics. For e.g. the fund may consider price based momentum strategy where the price and/or total returns of the stock across different time horizons may be considered.

The fund manager will aim to regularly monitor and rebalance the portfolio to ensure alignment with the momentum strategy. The in-house proprietary quantitative model will also be regularly monitored and reviewed for updation in line with evolving market trends and data. The Fund Manager may change the quantitative and qualitative parameters by addition or deletion of the parameters, so as to optimize returns.

[Read: The Ultimate Guide to the Best SIP Plans for 2025]

How will the scheme allocate its assets?

Under normal circumstances, Axis Momentum Fund will hold an allocation of 80% to 100% in Equity & Equity related instruments of companies selected based on momentum theme, 0% to 20% in Other Equity and Equity related instruments, 0% to 20% in Debt & Money Market Instruments and 0% to 10% in Units issued by REITs & InVITs.

Should investments in Axis Momentum Fund be considered?

Axis Momentum Fund follows a momentum-based investment strategy, meaning it invests in stocks that have shown strong price trends and are expected to continue performing well. This strategy can offer good returns in a bullish market but may underperform in a sideways or bearish market.

The fund focuses on stocks that have shown strong price movements over a defined period and aims to ride on this upward trend. Momentum funds tend to perform well in strong, trending markets but might lag during periods of high volatility or when the market is less directional. It's crucial to align such a fund with your view on market conditions.

The fund's portfolio is likely to have stocks that are volatile and sensitive to market trends. The risk is higher compared to large-cap funds or diversified equity funds, which focus on more stable, well-established companies.

This fund may experience sharp swings, so it is more suited for investors who are willing to tolerate short-term fluctuations in return for potentially higher gains. Additionally, the persistent macroeconomic uncertainty may keep short-term market volatility high. The performance of the scheme might therefore be impacted by these variables, among others.

[Read: Power Your Portfolio: 5 Sector & Thematic Funds to Consider]