Bengaluru, August 19, 2024: Tata Asset Management Company has announced the launch of Tata Nifty200 Alpha 30 Index Fund that aims to track the performance of the top 30 companies with high alpha within the Nifty200 Index. The alpha factor based passive investing strategy seeks to benefit from continued trends in the market. It adjusts to changing market conditions and increases the coverage and weightage of outperforming sectors/stocks and underweights underperforming sectors/stocks.
The Index’s methodology measures excess return generated by the portfolio relative to its benchmark index Nifty200 after adjusting for risk and volatility. Based on the alpha factor, the fund identifies and includes stocks that generate returns above the broad market return and risk-free return, giving more importance to stocks which generate high excess returns per unit of risk. As a result, Nifty200 Alpha 30 Index has been able to outperform market cap weighted indices like Nifty200 during market upturns. However, it should be noted that Nifty200 Alpha 30 Index may underperform vis-à-vis Nifty200 during market downturns.
At the launch of the index fund, Anand Vardarajan, Chief Business Officer, Tata Asset Management, said, “This strategy aims to capture extra returns over what Nifty200 index could provide by selecting the top 30 stocks which can deliver alpha. This is yet another differentiated offering from our side with a view to building our product portfolio. We believe these could add value to clients when it comes to constructing and diversifying their investment portfolio. ”
While sector exposure will change to reflect the outperforming sectors, the index will maintain a stock cap of 5% which makes the index diversified across sectors and stocks.
Index Methodology:
The Nifty200 Alpha 30 Index methodology measures excess investment return relative to the Benchmark index Nifty200 using 1 year trailing price. Top 30 stocks with highest Jensen’s Alpha are chosen, allocating more weight to stocks which generate high Alpha per unit of risk, i.e., volatility. Our Tata Nifty200 Alpha 30 Index Fund replicates this index.
Index is re-balanced on a quarterly basis using data ending last trading day of February, May, August, and November. The stocks should have a minimum listing history of 1 year as on the cut-off date and should be available for trading in derivative segment (F&O) as on the effective date.
