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NIFTY 200 Momentum 30 Index NIFTY 100 Low Volatility30 IndexThe RSI-Model was invested in Momentum only on 56% of the days, suggesting no unnecessary overweight on momentum all the time to generate alpha over an equal weighted model.The model generated an annualized alpha of 5 percentage points over its equal weighted counterpart and 8 percentage points over NIFTY 500 TRI. The performance is generated with consistency as is evident by the superior hit ratios, Sharpe & Sortino ratios and lower drawdowns.Meanwhile, the performance has been generated with relatively low churn with median of 1-2 trades each year.A trade-by-trade analysis shows that the model has an accuracy rate of ~60% i.e. when it shifts to momentum or low-volatility factor, that factor outperforms the other 60% of the time. Secondly, the chosen factor outperforms its alternative by 12.2% on average while underperforming by only ~3% on average when the call goes wrong.
Trend Following Model
The strategy employs a systematic, regime-based allocation model to dynamically shift between:
The shift is based on market strength. Market strength is determined by looking at the 14-month RSI of the NIFTY 500 Index.
We allocate 100% to momentum when RSI is above its 14-period moving average (MA), signaling
sustained market strength. Conversely, when RSI falls below its MA, we shift 100% to low volatility index,
prioritizing capital preservation in weakening market conditions.
This methodology is rooted in empirical research, leveraging RSI as a leading indicator of trend persistence—capturing upside momentum while mitigating downside risk through an adaptive factor rotation framework.
Backtest Period: 1st April 2005 to 30th March 2025
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