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CM Strategy

Momentum Portfolio Mid-Year Performance : Not bad, Can do better

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We are just over the half-way mark into 2020. The year that will get more than a passing mention in history books of the future.

Here’s a quick recap the Capitalmind Momentum Portfolio performance from January to end of June.


Chart shows the equity curve, or cumulative performance of the Momentum portfolio versus benchmarks.

Momentum Portfolio Mid-Year Performance : Not bad, Can do better

Overall, we are up by just under 8% for the year compared to the NIFTY which is down 14%.

Chart shows returns broken out by month.

Momentum Portfolio Mid-Year Performance : Not bad, Can do better

Pause for a moment, and you realise you typically see such numbers for entire years, not months.

Momentum has underperformed the NIFTY in 2 of the 6 months so far, in April and June. That difference in performance is even more stark versus the Smallcap 100 index in those two months. There are two reasons for this:

  1. We went to Gold, Cash and Debt in March and had nominal equity exposure coming into April. There was a point at the end of March when only 4 stocks (in the NSE listed stock universe) passed the Momentum criteria. We started redeploying to stocks over May and June.
  2. In June markets bounced all over the place and stocks have stopped and reversed direction on a dime

Chart shows drawdowns seen over the last six months.

Momentum Portfolio Mid-Year Performance : Not bad, Can do better

How to make sense of a drawdown chart: Drawdown charts show worst-case scenarios for a portfolio. This chart shows the return the unluckiest investor to have entered in 2020 would have had. The Momentum portfolio hit its 2020 peak on 20th Feb. An investor who invested at the end of that day would have been down 21% on 23rd March. As of June end, that same investor would be down -5.7 as of the end of June.


Finally, a summary of six-month performance.

Momentum Portfolio Mid-Year Performance : Not bad, Can do better

For the year we have been having, its hard to say what is good performance. On one hand we could have easily been in the red if we had delayed reducing equities when we did in March. But then the shrinking universe of momentum stocks should probably have caused us to do that sooner.

One of the key drawbacks of traditional momentum investing is it is high-beta i.e. momentum tends to magnify market movements, both up and down. We have tried to modify that by adding measures for downside protection. March 2020 was a stress-test of those measures, and as the numbers show, we had some success, but we still have some way to go to.

The Momentum framework will keep evolving as we keep trying to improve the risk-return profile of this strategy.


Premium members, as always, connect with us on slack for any questions / comments

For those who are new to the idea of momentum investing, here’s our SSRN whitepaper: Does Momentum Investing work in India?

Subscribers to Capitalmind Premium get access to our research, awesome member forum, and model portfolios, including the Momentum smallcase. Use Code CMPOFF10 to become a Premium member and get 10% off regular price. To only sign up for the Momentum smallcase, click here

If you’d like to know more, tweet / DM us on twitter @Capitalmind_in or @CalmInvestor