Factor Investing in India: Do "Smart Beta" Indices Outsmart Nifty 50 and Midcap 150? 24Nov2025
(The views expressed here are for information purposes only and should not be construed as a recommendation or investment advice. While the author is a CFA Charterholder with nearly 25 years of experience in financial markets, this content is intended to share general insights and does not constitute financial guidance. Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)
Explore how the so-called smart beta indices have performed over the years in comparison to broader indices, like, Nifty 50 and Nifty Midcap 150 indices.
Smart beta indices sit between passive and active investing. Unlike traditional market-cap-weighted indices such as the Nifty 50 or Nifty Midcap 150, the so-called smart beta indices use rule-based, transparent methodologies focused on specific factors—characteristics historically linked to better risk-adjusted returns.
In India, NSE has developed a wide range of Nifty Smart Beta / Factor Indices. This is a brief analysis of some of the smart beta indices.
1. Key Factors Used in Indian Smart Beta Indices:
1 Quality: Measures financial strength—high return on equity, low debt and stable earnings.
Nifty indices: Nifty 200 Quality 30 and Nifty Midcap 150 Quality 50.
2 Value: Focuses on undervalued stocks using metrics like P/E ratio, P/B ratio and dividend yield.
Nifty indices: Nifty 50 Value 20 and Nifty 200 Value 30.
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Related articles:
Nifty Midcap 150 Quality 50 Index: Has Quality Lost Its Edge? 10Aug2025
Decoding the Nifty Midcap 150 Quality 50: A Midcap Strategy Built on Fundamentals 07Aug2025
Passive Titans of India: The Top 10 Equity Indices by Fund Size 17Jul2025
Analysis of Nifty 100 Low Volatility 30 Index 12Sep2023
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2. Return Performance:
The returns of these indices are total returns, including dividends. Smart beta indices are selected based on the total assets (AUM or assets under management) of passive funds (both exchange traded funds or ETFs and index funds) tracking the indices.
Smart beta indices with the highest AUM are given at the top of the table, starting from, Nifty 200 Momentum 30 (highest AUM) to Nifty Midcap 150 Momentum 50 (lowest AUM among the eight selected). You could check a previous blog for top equity indices and their AUM.
Table 2: Trailing returns of select "smart beta" indices >
(click on the image to view better)
Observations from the above two tables >
A. Calendar Year performance trends:
> Momentum indices, like, Nifty 200 Momentum 30 and Nifty Midcap 150 Momentum 50, have done well in several years, like, 2017, 2021, 2022 and 2024
> but in 2025 so far, momentum factor has performed poorly and Indian stock markets lost momentum in 2024 and struggled for better part of 2025 versus global peers
> Low volatility factor (Nifty 100 Low Vol 30) does not have a negative return year in the past 11 years, showing resilience
> Low volatility indices deliver smoother returns but lag in strong rallies. In 2025, it underperformed sharply.
>
ets.
not
(the blog is yet to be completed; and the same shall be completed in the next one to two hours)
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Disclosure: I've got a vested interest in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and
opinion provided here are only for information purposes and should not be construed
as investment advice. Investors should consult their own financial advisers
before making any investments. The author is a CFA Charterholder with a vested
interest in financial markets.
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