Nifty Smart Beta Indices Review – August 2026: Nifty Smart Beta Indices Performance and Valuation at a glance 06Sep2026
(This is my 533rd blog since 2010. Over the years, I have covered global financial markets, with a focus on India, and continue to share insights to help readers understand complex topics in simple language.
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.
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This is a follow-up to my November 2025 article on factor investing and smart beta indices in India. This monthly review tracks how selected Nifty Smart Beta indices are performing against the Nifty 50 and Nifty Midcap 150.
It also looks at their trailing returns and valuations.
The aim is to see which factors are doing well and whether the earlier trends are continuing.
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Related articles:
Nifty Indices Broad Market and Sector Review – July 2026 02Aug2026
Factor Investing in India: Do "Smart Beta" Indices Outsmart Nifty 50 and Midcap 150? 24Nov2025
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
Low Expense Ratios, High Returns: Why Passive Equity Funds Matter 06Jun2025
How to Buy Nifty Midcap 150 Index (passive funds) 03May2024
Analysis of Nifty 100 Low Volatility 30 Index 12Sep2023 -------------------------
1. Performance of smart beta indices
The latest data show a mixed picture across Nifty smart beta strategies. Short-term performance varies considerably, but the longer-term record remains relatively strong for most indices.
Chart showing Trailing returns of select Nifty Smart Beta indices >
(Check references and notes at the end of the article for calendar year / annual returns of select smart beta indices from 2015 to 2025)
2. What do the trailing returns show?
Momentum remains the strongest performer over the longer periods. Nifty Midcap 150 Momentum 50 delivered annualised returns of 18.2 per cent over three years, 18.1 per cent over five years and 20.8 per cent over ten years.
Nifty 500 Momentum 50 also recorded a strong 19.0 per cent annualised return over ten years.
The Nifty 50, by comparison, delivered 12.0 per cent a year over ten years. This suggests that momentum has continued to be the standout factor over the longer term.
However, recent returns are less convincing. Nifty 500 Momentum 50 gained 5.1 per cent over one month and 12.0 per cent over one year. This shows that recent performance should not be confused with its much stronger long-term record.
Interestingly, Nifty 50 Equal Weight has outperformed the Nifty 50 because it gives much less weight to the largest stocks and spreads exposure more evenly across companies.
This has helped as sectors such as Auto, Metal and Telecommunications have performed strongly, while
Financial Services (with the highest weight of 36.5 per cent in Nifty 50 index as of 31Aug2026) has delivered dismal returns.
In other words, the equal-weight approach has benefited from broader market participation rather than depending heavily on a few large Nifty 50 stocks. This has supported both its recent and longer-term performance.
3. Low volatility and quality
Low volatility has been more defensive. Nifty 100 Low Volatility 30 delivered a 13.0 per cent annualised return over ten years. Its one-year return, however, was only 0.9 per cent.
Quality indices have delivered reasonable long-term returns but have not matched momentum.
They also trade at higher valuations. Nifty 200 Quality 30 has a PE ratio of 27.9, while Nifty Midcap 150 Quality 50 has a PE ratio of 32.1. The latter also has a high PB ratio of 7.2.
4. Valuations matter
Chart showing valuation data, consisting of PE ratio, PB ratio and dividend yield, of select Nifty Smart Beta indices >
Nifty 50 is relatively cheap, on both PE and PB ratios, compared to eight Nifty smart beta indices presented here.
The valuation data provide an important counterpoint to the return numbers. Strong past performance does not automatically mean that an index is attractively valued.
Investors need to consider what they are paying for that performance.
5. Momentum remains the long-term leader
The latest data broadly support the conclusion from my earlier article: momentum remains the strongest long-term performer among the selected smart beta strategies.
But momentum is also more cyclical. It can perform very well when market trends are strong and reverse sharply when market leadership changes.
Low volatility tends to offer greater stability, while quality provides a more balanced approach.
6. What should investors make of this?
There is no single smart beta factor that wins in every market phase. The latest numbers again show the importance of looking beyond short-term returns.
Momentum has the strongest long-term record, but its recent performance needs monitoring. Low volatility offers a more defensive option.
Quality has produced steady returns, but its relatively high valuations are worth watching.
7. Conclusion
The latest review does not change the broad conclusion from November 2025. Momentum continues to lead over the longer term, while other factors offer different risk and return characteristics. The next update will show whether this pattern continues or whether factor leadership begins to change.
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References and notes:
Nifty Return profile
Nifty Index Dashboard monthly - Aug2026 PDF
Nifty indices factsheets
Nifty indices methodology document
Chart showing calendar year / annual returns of select smart beta indices from 2015 to 2025 >
Click on the chart to view better >
Chart showing Index Reconstitution of NSE / Nifty Indices - Nifty Smart Beta Indices Rebalancing Frequency >
