Nifty Smart Beta Indices Review – September 2026: Nifty Smart Beta Indices Performance and Valuation at a glance 10Oct2026
(This is my 540th 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.
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.)
This is a follow-up to my September 2026 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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Analysis of Nifty 100 Low Volatility 30 Index 12Sep2023 -------------------------
The following analysis is based on the charts attached below.
1. Calendar year returns of smart beta indices
Calendar-Year Returns Show the Risks:
Calendar-year returns highlight the cyclical nature of smart beta strategies: momentum indices surged in 2021 and 2024, but suffered losses in 2022 and 2025.
No strategy leads every year; strong performance in one period can give way to sharp falls in the next.
In 2025, the Nifty 50 gained 11.9 per cent, while the Nifty 500 Momentum 50 lost 7.6 per cent. In 2024, the Nifty 500 Momentum 50 index gained 27.2 per cent, compared with just 10.1 per cent for the Nifty 50 (see chart 1 below for data).
The Nifty Midcap 150 Momentum 50 rose 78.3 per cent, while the Nifty 500 Momentum 50 gained 78.9 per cent in 2021. Such strong years can be followed by weak ones.
Momentum investing is therefore not a smooth ride.
2. Trailing returns of smart beta indices
Nifty Smart Beta Indices: Momentum Holds Up Better, compared to Low Volatility and Quality, Amid Market Weakness:
The Indian stock market had a difficult September 2026. Most Nifty indices fell over the month and the three-month returns were also negative. Yet, longer-term returns remained positive across all the indices shown.
The performance of smart beta indices offers some useful lessons for investors.
September and Recent Performance:
The Nifty 50 fell 6.4 per cent in one month and 4.9 per cent over three months. The Nifty Midcap 150 did worse over the month, losing 7.0 per cent, though it gained 4.6 per cent over one year.
Among the smart beta indices, the Nifty 500 Momentum 50 performed relatively well. It lost 5.8 per cent in one month and 1.7 per cent over three months. Its one-year return was 5.1 per cent. The Nifty Midcap 150 Momentum 50 also delivered a positive one-year return of 4.1 per cent.
Low volatility and quality strategies had a tougher year. The Nifty 100 Low Volatility 30 fell 4.7 per cent over one year, while the Nifty 200 Quality 30 lost 5.4 per cent.
Long-Term Returns Tell a Different Story:
Despite recent weakness, the longer-term picture remains encouraging. The Nifty Midcap 150 Momentum 50 delivered annualised returns of 13.5 per cent over three years, 15.1 per cent over five years and 19.7 per cent over ten years.
The Nifty 500 Momentum 50 also performed strongly, with annualised returns of 11.4 per cent over three years, 12.4 per cent over five years and 18.3 per cent over ten years.
The broad Nifty 50 returned 6.1 per cent annually over three years (one of the worst in recent years) and 11.5 per cent over ten years. These figures suggest that momentum strategies have rewarded patient investors over longer periods, although they can still suffer sharp falls in shorter time periods.
3. Valuations and Dividends Matter
Valuations offer another reason for caution. As at the end of 30Sep2026, the Nifty 500 Momentum 50 had a price-to-earnings ratio of 29.4 and a price-to-book ratio of 5.8. Its dividend yield was only 0.50 per cent.
By comparison, the Nifty 50 had a price-to-earnings ratio of 19.4, a price-to-book ratio of 2.8 and a dividend yield of 1.22 per cent.
The Nifty 200 Quality 30 had a relatively high price-to-book ratio of 7.9, while the Nifty Midcap 150 Quality 50 had a price-to-earnings ratio of 29.7. Investors should remember that strong past returns do not automatically make an index attractive at its current valuation.
Charts numbered 1 to 3 >
all data as at end-30Sep2026 >
Chart 1: Calendar year returns of Nifty "smart beta" indices (from 2018 to 2026) (2026 data till 30Sep2026) >
Chart 2: Trailing returns of Nifty "smart beta" indices >
Chart 3: Nifty "smart beta" indices valuation data >
Click on the charts to view better >
4. Action button
Smart beta indices are cyclical (as shown by calendar and trailing returns above) and strategies that lead in one period can lag sharply in another, so past returns should not be taken as a guide to future performance.
Investors should look beyond the latest returns. Valuations, investment costs, risk tolerance and the time available to stay invested all matter.
Smart beta indices follow specific rules to select and weight stocks. They are not guaranteed to outperform the broader market.
For most individual investors, a diversified portfolio is more sensible than chasing the best-performing strategy of the past. Smart beta strategies may have a role, but they should be chosen carefully and with a long-term view.
Limited ETF trading volumes and low assets under management in many passive funds tracking the smart beta indices also warrant caution, particularly over liquidity, trading costs and ease of exit.
Past performance does not guarantee future returns. Please do your own research or consult a qualified financial adviser before making investment decisions.
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References and notes:
Nifty Return profile
Nifty Index Dashboard monthly - Sep2026 PDF
Nifty indices methodology document
Chart showing Index Reconstitution of NSE / Nifty Indices - Nifty Smart Beta Indices Rebalancing Frequency >
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