Mi_MT_allcap, as the name suggests, is a Momentum Investing portfolio for capturing Medium Term trends with stocks chosen from an all-cap universe of all NSE listed stocks with market cap above INR 1000 crore.
An up-to 20 stock portfolio with equal weights for each component has been selected from the NSE universe (which is made up of the large mid and small cap companies) based on their Momentum ranking. Momentum ranking is quantitative listing of out-performance of each stock with respect to its peer group over the last many periods subject to some minimum qualifications. Additional volume based filters are also used to ensure that only stocks with good trading depth are chosen. Every week the portfolio is reviewed and stocks which do not hold up the momentum ranks are shelved while new ones enter. At times when new momentum picks are not available the portfolio will sit in cash (in interest bearing instruments like LIQUIDBEES).
The single biggest advantage of these momentum strategies is that the portfolios are never allowed to bleed endlessly in loss and the winner are allowed to run to their maximum potential. The mathematical advantage of having big winners and smaller losers ultimately are able to bring home the desired portfolio gain. Momentum portfolios out-perform the most in market up-trends and can under-perform in downtrends.
The results of this strategy from Apr 2016 to Nov 2018 are presented here:
The strategy has been running live in the small case strategy since Nov 2018. The strategy generated 117 trades in this three year period and the winner: loser ratio was 49:51. Each winner however was up on average +48% while each loser was down -12%. The portfolio max drawdown recorded was -22%. The average holding period for any investment was about 20 weeks.
This is an entirely non discretionary strategy which means that there is no weight-age to any opinion , forecast or fundamental bias towards the stock selection or deletion and the strategy is run as per well tested mechanical rules. An advisory update is issued every weekend and the changes required in the portfolio (if any) are communicated via email to the user the following Monday morning to be executed by a single click by the user.
The smallcases platform helps execute this strategy in a seamless manner. This service is currently available for Zerodha, AxisDirect, HDFCSec , Edelweiss and other select brokerage users only.