Active momentum mutual funds outperformed the Nifty 50 and Nifty 500 indices over the past three and six months. While these funds delivered average gains of nearly 10.8% in the six-month period ending July 23, 2026, their performance varies due to different stock selection and risk-hedging models. Investors should consider the inherent risks of trend-following strategies, particularly during market corrections.
Detailed Coverage
Active momentum funds have gained attention by outperforming broader market benchmarks during recent periods of high volatility. For the three months ending July 23, 2026, these funds reported average returns of approximately 6.4%, while the Nifty 500 TRI returned 1.2% and the Nifty 50 TRI saw a decline of 0.7%. Over a six-month horizon, the performance gap widened, with active momentum funds delivering average returns of 10.8%, significantly ahead of the Nifty 500 TRI’s 1.8% and a negative 4.1% for the Nifty 50 TRI.
Diverse Investment Models
Unlike passive funds that mirror specific indices, active momentum funds use proprietary models to decide when to buy or sell stocks. Some fund houses, such as ICICI Prudential AMC and Kotak AMC, focus on earnings momentum by identifying companies with improving earnings trajectories that consistently exceed market expectations. Other funds integrate fundamental analysis; for instance, Motilal Oswal uses its QGLP (quality, growth, longevity, and price) framework to select stocks before applying price-momentum filters.
Other managers prioritize pure price signals. Funds from Samco, Union, and NJ Momentum Fund operate based on price trends, though their execution styles differ. Some are strictly rule-based, such as the NJ Momentum Fund, while others, like Union Mutual Fund, allow managers discretion to exit positions if adverse conditions threaten asset value. These active managers often maintain a broader investment universe—sometimes covering up to 750 stocks—to allow for faster portfolio rebalancing compared to passive momentum funds.
Managing Volatility and Downside Risks
Momentum investing carries the risk of sharp losses if market trends reverse suddenly. To combat this, active funds use various risk-management strategies. Samco AMC utilizes hedging through futures contracts or by reducing net equity exposure during downturns. Union AMC opts to increase its cash holdings during periods of weak market momentum. Meanwhile, managers at Motilal Oswal monitor portfolios daily to enable rapid exits if price trends weaken.
However, these strategies are not foolproof. Earnings-based models may struggle in sideways markets, and even funds with downside controls can face sharp corrections. Because these active momentum schemes are relatively new in the Indian market, they have not yet been tested across a full, long-term market cycle. Investors looking at these products should evaluate how each fund's specific model—whether earnings-focused, quality-blended, or rule-based—aligns with their personal risk tolerance. Future performance will depend on the manager's ability to navigate volatile phases and maintain liquidity while rebalancing portfolios.