Trend rules on Indian indices have cut the worst falls, but none has beaten buying and holding by more than luck would explain, and after tax they trailed on every large-cap index. Rotating into the strongest sectors has not paid either. The one result that holds up is stock momentum: last year's winning stocks have kept beating last year's losers. Everything here was written down before the results were seen.
Written for investors tempted by timing rules, and anyone who wants to see a null result stated plainly. Data to 5 Oct 2026.
The record
Each question, what we found, and the number that decided it. The sections below show the workings.
The rules, assets, costs and tests were fixed in the pre-registered specification before any Indian result was computed, and every rule tried is counted. These are historical tests on indices, not signals.
Every rule pays 0.10% of value traded each way and fund running costs while invested. After-tax results apply Indian capital-gains rules by date and sell everything at the end. The deflated Sharpe ratio asks whether an edge over buy-and-hold is bigger than luck would produce across all the rules tried: below 0.95, it could be luck. Read the specification.
Trend following, full history
Each rule holds an asset only while its trend is up and sits in cash otherwise. The two grids give every rule on every asset (35 pairs) over its full history: the after-tax gap against buying and holding, and how much shallower or deeper the worst fall was. The full numbers are in the table below them.
After tax, rule minus buy-and-hold
Percentage points a year, full history of each asset. Blue: the rule kept more after tax; red: buying and holding did.
After tax, rule minus buy-and-hold. Heat table, 7 rows by 5 columns. Values from −6.8 pts to +1.4 pts.
Worst fall, rule minus buy-and-hold
Percentage points. Blue: the rule's worst fall was shallower than buying and holding's; red: deeper.
Worst fall, rule minus buy-and-hold. Heat table, 7 rows by 5 columns. Values from −2 pts to +39 pts.
Every rule on every asset in a table: returns, falls, time invested and the deflated Sharpe
Strategy minus buy-and-hold. Returns are annual (CAGR); drawdown is the worst peak-to-trough fall. After-tax uses Indian capital-gains rules by date.
Asset
Rule
From
Rule CAGR
Buy-hold CAGR
After tax, rule minus buy-hold
Rule worst fall
Buy-hold worst fall
Time invested
Deflated Sharpe vs buy-hold
More
Nifty 50
10-month average
2000-04-04
10.9%
12.0%
−1.1 pts
−44%
−60%
71%
0.01
Nifty 50
200-day average
2000-04-18
9.7%
12.3%
−2.1 pts
−32%
−60%
71%
0.00
Nifty 50
12-month momentum
2000-07-04
9.7%
12.2%
−2.4 pts
−40%
−60%
64%
0.00
Nifty 50
Blend of all four
2000-07-04
10.9%
12.2%
−2.2 pts
−26%
−60%
59%
0.01
Nifty 50
Breakout
2000-07-03
9.3%
12.3%
−3.2 pts
−31%
−60%
56%
0.00
Nifty 500
10-month average
1995-11-02
11.6%
13.2%
−2.5 pts
−45%
−67%
69%
0.01
Nifty 500
200-day average
1995-11-10
12.2%
13.3%
−1.4 pts
−39%
−67%
68%
0.01
Nifty 500
12-month momentum
1996-02-02
9.7%
13.9%
−3.9 pts
−49%
−67%
60%
0.00
Nifty 500
Blend of all four
1996-02-02
11.1%
13.9%
−3.6 pts
−46%
−67%
58%
0.00
Nifty 500
Breakout
1996-01-31
9.6%
14.0%
−5.2 pts
−45%
−67%
50%
0.00
Nifty Next 50
10-month average
2003-09-02
16.3%
17.1%
−1.3 pts
−37%
−72%
74%
0.03
Nifty Next 50
200-day average
2003-08-28
16.2%
17.1%
−2.0 pts
−33%
−72%
73%
0.02
Nifty Next 50
12-month momentum
2003-12-02
12.0%
16.2%
−4.2 pts
−44%
−72%
67%
0.00
Nifty Next 50
Blend of all four
2003-12-02
14.2%
16.2%
−2.9 pts
−35%
−72%
63%
0.01
Nifty Next 50
Breakout
2003-11-10
12.6%
16.4%
−3.8 pts
−41%
−72%
63%
0.00
Nifty Midcap 150
10-month average
2006-02-02
10.1%
14.9%
−5.0 pts
−53%
−73%
74%
0.00
Nifty Midcap 150
200-day average
2006-01-18
16.2%
15.0%
+0.1 pts
−37%
−73%
72%
0.10
Nifty Midcap 150
12-month momentum
2006-05-03
7.2%
13.9%
−6.8 pts
−55%
−73%
66%
0.00
Nifty Midcap 150
Blend of all four
2006-05-03
11.6%
13.9%
−2.8 pts
−39%
−73%
62%
0.01
Nifty Midcap 150
Breakout
2006-04-05
10.6%
14.1%
−3.9 pts
−42%
−73%
56%
0.00
Nifty Smallcap 250
10-month average
2006-02-02
14.3%
13.4%
+0.1 pts
−45%
−76%
67%
0.09
Nifty Smallcap 250
200-day average
2006-01-18
15.5%
13.4%
+1.4 pts
−36%
−76%
66%
0.14
Nifty Smallcap 250
12-month momentum
2006-05-03
10.9%
12.3%
−1.9 pts
−50%
−76%
55%
0.02
Nifty Smallcap 250
Blend of all four
2006-05-03
13.4%
12.3%
0.0 pts
−37%
−76%
58%
0.08
Nifty Smallcap 250
Breakout
2006-04-05
12.5%
12.8%
−1.4 pts
−38%
−76%
50%
0.04
Gold
10-month average
2001-06-04
12.0%
14.6%
−3.3 pts
−23%
−26%
79%
0.00
Gold
200-day average
2001-05-29
11.8%
14.4%
−4.0 pts
−28%
−26%
79%
0.00
Gold
12-month momentum
2001-09-04
13.0%
14.6%
−2.3 pts
−23%
−26%
72%
0.00
Gold
Blend of all four
2001-09-04
11.3%
14.6%
−5.3 pts
−22%
−26%
63%
0.00
Gold
Breakout
2001-08-09
12.7%
14.7%
−3.3 pts
−23%
−26%
73%
0.00
G-sec 5-year
10-month average
2002-07-02
7.3%
7.4%
−0.2 pts
−5%
−7%
94%
0.03
G-sec 5-year
200-day average
2002-06-24
7.1%
7.5%
−0.5 pts
−6%
−7%
94%
0.00
G-sec 5-year
12-month momentum
2002-10-03
6.8%
7.3%
−1.0 pts
−5%
−7%
62%
0.01
G-sec 5-year
Blend of all four
2002-10-03
6.8%
7.3%
−2.2 pts
−5%
−7%
60%
0.00
G-sec 5-year
Breakout
2002-09-05
7.0%
7.3%
−0.3 pts
−6%
−7%
93%
0.01
Gold: growth of 1 under each trend rule and buy-and-hold
Weekly, pre-tax, after costs.
How to read it. Log scale, so equal slopes are equal returns. Look first at the big falls, where the rule lines flatten out, then at where each line ends. Tax, shown in the table, widens the gap against the rules.
Each month, hold the three NSE sector indices with the best 12-month (or 6-month) return, skipping the latest month, against an equal-weighted basket of all sectors. Only two rules were tried, so the bar for luck is lower; over the full period neither clears it.
Rule
Window
Momentum CAGR
Equal-weight CAGR
Nifty 500 CAGR
Momentum minus EW
Months beating EW
Worst fall
Deflated Sharpe vs EW
More
mom12_1
full
14.5%
15.5%
13.7%
−1.0 pts
49%
−56%
0.33
mom12_1
first_half
16.2%
17.1%
14.4%
−0.9 pts
54%
−56%
–
mom12_1
second_half
12.8%
13.8%
12.9%
−1.0 pts
45%
−36%
–
mom12_1
since_2012
14.0%
16.2%
14.3%
−2.1 pts
47%
−36%
–
mom6_1
full
16.9%
15.5%
13.7%
+1.4 pts
50%
−53%
0.66
mom6_1
first_half
17.6%
17.1%
14.4%
+0.5 pts
49%
−53%
–
mom6_1
second_half
16.4%
13.8%
12.9%
+2.7 pts
52%
−42%
–
mom6_1
since_2012
17.0%
16.2%
14.3%
+0.8 pts
51%
−42%
–
Sector momentum against equal weight
Monthly, after costs.
How to read it. The heavier line is the momentum portfolio, the grey line the basket it chooses from. A gap that opens and closes is noise; the deflated Sharpe in the table says whether it is more than that.
Each of the 24 votes can be run alone as a rule: hold the Nifty 500 while it votes up, cash otherwise. Their results differ widely, from 9.1% to 16.4% a year, and which one wins depends on the period. The ensemble holds the share of votes that are up: 60% invested on average.
Every rule: reward against the worst fall
Nifty 500, full history, after costs, before tax. Each dot is one of the 24 single rules; colour is the signal type.
How to read it. Up is better reward for risk; right is a shallower worst fall. Buying and holding sits far to the left. The single rules scatter widely. The ensemble ranks 9th of 25 on Sharpe without anyone having to know in advance which rule would do best.
Past returnPrice vs averageAverage crossoverChannel positionEnsembleBuy and hold
Rank among the 25 strategies, rolling five-year windows
Percentile of each strategy's Sharpe ratio among all 25 in the five years to each date (100 = best).
How to read it. The best rule over the whole period spent 17% of five-year stretches in the bottom fifth; nobody holding it then would have known it would win. The ensemble spent 0% there. That is the case for it.
EnsembleBest single rule over the full period (Price vs average, 1 month)Worst single rule (Past return, 6 months)
Loading chart…
Source: NSE total-return indices; gold in rupees (WGC); NSE 5-year G-sec index; 91-day T-bill (RBI); rupee per dollar from ECB reference rates.
Weekly, after trading and fund costs, before tax. The signal is set at one close and acted on at the next.
How to read it. Log scale, so equal slopes are equal returns. The best and worst single rules are chosen with hindsight. The ensemble sits between them, with shallower falls than buying and holding.
EnsembleBuy and holdBest single: Price vs average, 1 monthWorst single: Past return, 6 months
Loading chart…
Source: NSE total-return indices; gold in rupees (WGC); NSE 5-year G-sec index; 91-day T-bill (RBI); rupee per dollar from ECB reference rates.
Every specification on the Nifty 500, full history, before tax.
Rule
Return a year
Volatility
Sharpe
Worst fall
Time invested
Turnover a year
More
Past return, 1 month
13.9%
14.3%
0.53
−28%
58%
19.4×
Price vs average, 1 month
16.1%
14.0%
0.67
−20%
58%
23.4×
Average crossover, 1 month
14.3%
14.3%
0.55
−26%
58%
13.7×
Channel position, 1 month
16.0%
14.2%
0.66
−21%
60%
21.7×
Past return, 2 months
15.7%
15.0%
0.62
−36%
60%
12.7×
Price vs average, 2 months
15.1%
14.6%
0.59
−31%
60%
14.5×
Average crossover, 2 months
14.5%
15.3%
0.53
−38%
60%
6.5×
Channel position, 2 months
15.8%
14.7%
0.63
−38%
61%
12.8×
Past return, 3 months
14.6%
14.8%
0.56
−42%
59%
10.4×
Price vs average, 3 months
16.4%
14.6%
0.67
−34%
59%
11.4×
Average crossover, 3 months
13.9%
15.7%
0.49
−44%
60%
4.3×
Channel position, 3 months
15.9%
14.7%
0.64
−40%
61%
11.1×
Past return, 6 months
9.1%
15.8%
0.22
−45%
57%
8.4×
Price vs average, 6 months
14.6%
14.9%
0.56
−40%
60%
7.9×
Average crossover, 6 months
13.0%
16.3%
0.43
−53%
59%
2.1×
Channel position, 6 months
15.2%
14.8%
0.59
−32%
61%
7.9×
Past return, 9 months
9.6%
15.4%
0.25
−52%
58%
7.0×
Price vs average, 9 months
13.3%
15.2%
0.47
−34%
59%
7.4×
Average crossover, 9 months
9.5%
16.1%
0.24
−49%
59%
1.6×
Channel position, 9 months
12.6%
14.6%
0.44
−38%
61%
7.6×
Past return, 12 months
10.1%
15.8%
0.28
−49%
60%
7.4×
Price vs average, 12 months
11.4%
15.0%
0.36
−38%
59%
8.0×
Average crossover, 12 months
9.4%
16.1%
0.23
−49%
59%
1.4×
Channel position, 12 months
11.9%
14.9%
0.39
−40%
62%
6.6×
Ensemble (all 24)
13.8%
13.0%
0.56
−33%
60%
8.9×
Buying and holding: 13.9% a year, Sharpe 0.40, worst fall -67%. Short-horizon rules trade often; after Indian capital-gains tax their results would be markedly worse (see the single rules).
Timing luck
Many rules are checked once a month. Which day? Here each rule is checked once every 21 sessions, on each of the 21 possible starting days. The bars show the range of annual returns that produced; the tick is the "tranched" version, which splits money across all 21 days, as Newfound Research recommends. The typical rule's range is 4.2 points a year.
WorstRange across rebalance dates tranchedBestSpread
Past return, 1 month8.3%13.3%5.0 pts
Price vs average, 1 month4.3%15.7%11.3 pts
Average crossover, 1 month6.6%14.5%7.9 pts
Channel position, 1 month5.5%15.8%10.3 pts
Past return, 2 months8.4%14.0%5.6 pts
Price vs average, 2 months7.8%14.6%6.8 pts
Average crossover, 2 months9.2%12.8%3.6 pts
Channel position, 2 months8.9%14.6%5.7 pts
Past return, 3 months10.9%15.9%5.0 pts
Price vs average, 3 months9.2%15.4%6.2 pts
Average crossover, 3 months9.4%12.1%2.8 pts
Channel position, 3 months10.4%15.4%5.1 pts
Past return, 6 months7.2%12.0%4.8 pts
Price vs average, 6 months10.4%13.9%3.5 pts
Average crossover, 6 months8.9%12.2%3.3 pts
Channel position, 6 months10.1%14.3%4.2 pts
Past return, 9 months8.1%11.7%3.6 pts
Price vs average, 9 months9.4%12.4%3.0 pts
Average crossover, 9 months9.2%11.0%1.7 pts
Channel position, 9 months9.2%13.4%4.2 pts
Past return, 12 months8.2%10.3%2.1 pts
Price vs average, 12 months8.8%11.7%2.9 pts
Average crossover, 12 months9.5%11.7%2.2 pts
Channel position, 12 months8.6%12.2%3.6 pts
Ensemble (all 24)9.9%13.2%3.2 pts
Annual return of each rule on the Nifty 500 checked every 21 sessions, by starting day, full history, before tax. Tranching does not raise the expected return; it removes the luck of the draw.
What happened next
Nifty 500 total returns after every session in each score band. A trend score describes the past; this figure shows how little it has said about the next few months on its own.
After each score band: the next 3 and 12 months
Nifty 500 total return after every session in the band, full history. Today's band, 0–20, is in bold.
How to read it. Each dot is the median Nifty 500 return after sessions in that band, and the bar is the middle half of those returns. The shaded column is all sessions. The number on the right counts separate spells that do not overlap: thousands of sessions are only this many independent pieces of evidence. A band whose bar sits over the shaded column has said little; hollow rows have under five spells.
After each score band: the next 3 and 12 months. 2 horizons, 5 bands. 0–20: median +4.3%, 52 spells; 20–40: median +3.5%, 64 spells; 40–60: median +2.1%, 75 spells; 60–80: median +3.8%, 76 spells; 80–100: median +4.9%, 76 spells. All sessions: median +4.1%.
Every column in a table: share up and the worst fall too
Nifty 500 total return after each session in the band, full history.
Reading
Sessions
Separate 3-month spells
Next 3 months, median
Next 3 months, middle half
3 months: share up
Worst fall within 3 months, median
Next 12 months, median
More
0–20
1,528
52
+4.3%
−4% to +13%
64%
−5.3%
+14.1%
20–40
930
64
+3.5%
−5% to +11%
61%
−5.3%
+9.7%
40–60
1,058
75
+2.1%
−7% to +9%
56%
−5.6%
+7.8%
60–80
1,009
76
+3.8%
−3% to +10%
65%
−3.5%
+11.6%
80–100
3,028
76
+4.9%
−3% to +12%
66%
−3.7%
+13.9%
All sessions
7,553
120
+4.1%
−4% to +11%
64%
−4.4%
+12.1%
The tests
Written down before any result was computed. The question was never whether trend following beats the market here; an earlier test said no. It was whether an ensemble removes the fragility of single rules, and what it costs.
TR-H1Is the ensemble a safer choice than picking one specification?PassedYes. Across 309 rolling five-year windows its worst rank among the 25 strategies was the 28th percentile, against the 6th for the typical single specification. Its Sharpe ratio over the full period, 0.56, was above the typical single's 0.53.
Worst rank in any of 309 five-year windows (percentile among 25)typical single rule 6th28th
TR-H2How much does the day of the month you check a rule matter?MeasuredA lot. Checked once every 21 sessions, the typical specification's annual return moved by 4.2 points depending on the day; the worst case was 11.3 points. The ensemble's spread was 3.2 points.
TR-H3Does the ensemble beat buying and holding, once the number of rules tried is counted?FailedNo. 13.8% a year against 13.9%, with a far smaller worst fall (-33% against -67%). The deflated Sharpe ratio is 0.02 with 84 trials counted; it would need 0.95. Before tax.
Deflated Sharpe ratio against buying and holding, 84 trialsneeded 0.950.02
TR-H4Does the score add to a forecast of volatility or a 10% fall?FailedNo. For a 10% fall within three months p = 0.77; for volatility p = 0.02, but with opposite signs in the two halves of the sample, and neither improved out-of-sample forecasts.
p-value, score added to the odds of a 10% fallbar 0.02510.10.010.0010.00010.77
p-value, score added to the volatility forecastbar 0.02510.10.010.0010.00010.025
p-values on a log scale; smaller is stronger evidence, to the right. Shaded: the side that passes the bar set in advance.
✓ 10% fall: same sign in both halves: met
✗ Volatility: same sign in both halves: not met
✗ Improves out-of-sample forecasts: not met
Tests, samples and pass bars were fixed in the pre-registered specification before any result was computed. A pass needs every condition written there, not only a small p-value.
How it is built
Four signal types at six horizons, on the excess return over cash. Equal weights, nothing fitted.
The signals. Past return (is the price above where it was h sessions ago?), price against its average (above its h-session average?), average crossover (is a quarter-length average above the h-session one?) and channel position (is the price in the upper half of its h-session range?). Horizons are 21, 42, 63, 126, 189 and 252 sessions. Each "up" is one vote; the score is the share of up votes.
Why these. Levine and Pedersen (2016) show that past-return and moving-average rules are close relatives, both weighted sums of past returns. So diversifying across horizons matters more than across signal types. Corey Hoffstein and colleagues at Newfound Research have written at length on two other risks of single rules. One is specification risk: the best lookback in a backtest is close to random out of sample. The other is timing luck (see "Rebalance Timing Luck: The (Dumb) Luck of Smart Beta", 2020). Their remedy for both is an ensemble with tranched rebalancing, which is what this page measures. We follow the method, not any product.
Trend environment. Niels Kaastrup-Larsen's Trend Barometer (Top Traders Unplugged) reads how strongly markets are trending. Its method is not public, so ours is a separate, disclosed measure in the same spirit.
Execution and costs. Signals at one day's close, trades at the next day's close. 0.10% of value traded each way; index-fund running costs while invested; the cash leg earns the 91-day T-bill rate less a liquid fund's costs.
Stock momentum: is it paying?
Three readings, each against its own history. Momentum's return: the top fifth of stocks by the blend minus the bottom fifth, over the last 12 months (gross, before costs). Momentum breadth: the share of the 1,339 liquid stocks whose 12-1 month return is positive. The crash flag: whether the Nifty 500's total return over two years is negative.
Momentum's return, 12 months
+27%54th percentile, to Sept 2026
Momentum breadth
45%of stocks up over 12-1 months; 24th percentile
Crash flag
Onthe market is below where it was two years ago
Momentum's 12-month return
Top fifth minus bottom fifth by the blended score, rolling 12 months, gross. Monthly.
How to read it. Above zero, past winners kept winning. The deep plunges below zero are momentum crashes; note when they came.
Loading chart…
Source: NSE bhavcopy (main board), prices adjusted for corporate actions; liquid point-in-time universe; NSE Indices for Nifty200 Momentum 30.
Each month, hold the three of 13 non-overlapping sectors with the highest blended score, against all 13 equally weighted, after costs. This was written down in advance, as the third sector-momentum rule we have tried. It failed: 16.0% a year against 14.6%, beating the basket in 49% of months; the edge was positive in the first half and negative in the second; deflated Sharpe 0.57 against the 0.95 needed. Formed at the end of Sept 2026, it would hold Pharma, Metal, Media.
Sector momentum against all sectors
Growth of 1, monthly, after costs; 13 non-overlapping NSE sector indices, total returns.
How to read it. The heavier line rotates into the three strongest sectors each month; the grey line holds them all. A gap that opens and closes again is noise.
Top three sectors by blended momentumAll sectors, equal weight
Loading chart…
Source: NSE Indices total-return series (dividends reinvested).
Momentum can be measured many ways. The blend z-scores each of the six within the universe every month, caps extremes at three standard deviations, and averages them with equal weights. Below: each flavour's long-short record since Nov 2004, and how alike their rankings are.
Top fifth minus bottom fifth: growth of 1
Monthly, gross of costs, log scale. A factor measure, not an investable portfolio.
How to read it. Log scale. Look at the steep drops, which are momentum crashes. Residual momentum, which strips out the market's own moves, has the steadiest line.
Blend12-1 monthResidual52-week high
Loading chart…
Source: NSE bhavcopy (main board), prices adjusted for corporate actions; liquid point-in-time universe; NSE Indices for Nifty200 Momentum 30.
Long-short (top fifth minus bottom fifth), monthly, gross, since the start of the sample.
How to read it. Up is a better Sharpe ratio; right is a shallower worst fall. The blend is the large dot.
Single flavourBlend of all six
How alike the flavours are
Average month-by-month rank correlation between flavours. The stronger the colour, the more alike; faint pairs bring the most variety to a blend.
12-1
6-1
Vol-adj.
Residual
52-wk high
NSE score
12-1
6-1
0.67
Vol-adj.
0.97
0.66
Residual
0.73
0.53
0.74
52-wk high
0.52
0.53
0.55
0.36
NSE score
0.82
0.82
0.85
0.64
0.71
The flavours in tables: long-short and long-only
Long-short (top fifth minus bottom fifth), monthly, gross.
Flavour
Average month
Volatility
Sharpe
Worst fall
More
Residual (stock-specific) 12-1
1.33%
13.7%
1.17
−40%
NSE's normalised score
1.86%
20.1%
1.11
−49%
Blend of all six
1.83%
21.6%
1.01
−59%
Volatility-adjusted 12-1
1.61%
20.5%
0.94
−61%
6-1 month return
1.45%
18.8%
0.92
−44%
12-1 month return
1.55%
23.3%
0.80
−72%
Nearness to 52-week high
1.43%
27.1%
0.63
−71%
Average month-by-month rank correlation between flavours. Lower means more variety to blend.
12-1
6-1
Vol-adj.
Residual
52-wk high
NSE score
More
12-1 month return
1.00
0.67
0.97
0.73
0.52
0.82
6-1 month return
0.67
1.00
0.66
0.53
0.53
0.82
Volatility-adjusted 12-1
0.97
0.66
1.00
0.74
0.55
0.85
Residual (stock-specific) 12-1
0.73
0.53
0.74
1.00
0.36
0.64
Nearness to 52-week high
0.52
0.53
0.55
0.36
1.00
0.71
NSE's normalised score
0.82
0.82
0.85
0.64
0.71
1.00
Long-only: hold the top fifth, equal weight, after 0.25% trading cost each way, against all liquid stocks equally weighted. Price returns.
Flavour
Return a year
All stocks
Difference
Worst fall
Turnover a year
More
12-1 month return
22.1%
13.7%
+8.3 pts
−74%
2.9×
6-1 month return
20.6%
13.7%
+6.9 pts
−71%
4.3×
Volatility-adjusted 12-1
24.2%
13.7%
+10.5 pts
−73%
3.0×
Residual (stock-specific) 12-1
20.3%
13.7%
+6.6 pts
−75%
3.2×
Nearness to 52-week high
20.4%
13.7%
+6.7 pts
−67%
5.2×
NSE's normalised score
26.4%
13.7%
+12.6 pts
−72%
3.2×
Blend of all six
26.0%
13.7%
+12.2 pts
−72%
2.9×
The crash flag
Daniel and Moskowitz (2016) found that momentum's crashes come in "panic states": after a long market fall, when the market rebounds, last year's losers (the most beaten-down stocks) jump and last year's winners lag. Our flag is their bear-market indicator: the Nifty 500's two-year return below zero.
Every month of momentum, with the crash flag
Long-short return of the blend each month, gross. Shaded: months when the flag was on going in.
How to read it. Momentum gained in 71% of months. The deep red bars are the crashes; see how many sit in the shaded spans, which follow a two-year fall in the market.
Momentum lostMomentum gainedCrash flag on
The ten worst months, in a table
The ten worst months for the blend's long-short, and whether the flag was on going into them.
Month
Long-short return
Flag
May 2009
−45.2%
On
Jan 2012
−23.4%
On
Jun 2020
−19.6%
On
Dec 2008
−17.0%
On
Oct 2013
−12.6%
Off
Apr 2026
−11.9%
Off
Aug 2020
−10.8%
On
Apr 2020
−10.5%
On
May 2014
−10.5%
Off
Aug 2009
−10.1%
Off
The flag was on in 28 months since 2004. In those months the long-short averaged −2.01%; in the rest, +2.29%. The difference narrowly misses the significance bar we set in advance.
Timing luck in Nifty200 Momentum 30
NSE's Nifty200 Momentum 30 picks 30 stocks twice a year, in June and December. We rebuilt it from NSE's published method, then ran the same rules on the five other half-yearly calendars. Same stocks, same rules, different months: annual returns ranged from 13.4% to 21.7% since Jun 2005, a spread of 8.3 points a year. In 2009 the best and worst calendars differed by 70 points.
The replica on each half-yearly calendar, price returns, before costs.
Rebalanced in
Return a year
Volatility
Sharpe
Worst fall
More
Jan and Jul
17.6%
27.3%
0.74
−70%
Feb and Aug
20.1%
28.1%
0.80
−72%
Mar and Sep
21.7%
28.3%
0.85
−73%
Apr and Oct
20.9%
27.0%
0.85
−74%
May and Nov
18.1%
26.7%
0.77
−76%
Jun and Dec (NSE's)
13.4%
26.9%
0.61
−77%
Each year, how far apart the six calendars ended
Calendar-year return of the replica on each half-yearly rebalance calendar, price returns before costs. Full years only.
How to read it. Each row is a year and each dot one calendar; the line spans the best and worst. The longer the line, the more the choice of months mattered that year. NSE's own calendar is the bold dot.
The other five calendarsJune and December (NSE's)
Each year, how far apart the six calendars ended. Dot plot of 20 items. Jan and Jul: highest 2007 at 95%, lowest 2008 at −68%.
The same returns as a table
Calendar-year returns of the replica by rebalance calendar (months), %. Full years only.
Jan, Jul
Feb, Aug
Mar, Sep
Apr, Oct
May, Nov
Jun, Dec
2006
+32
+46
+40
+38
+32
+36
2007
+95
+122
+116
+94
+99
+83
2008
−68
−70
−70
−71
−75
−75
2009
+93
+132
+112
+114
+76
+63
2010
+12
+16
+9
+4
+5
+13
2011
−26
−32
−23
−18
−19
−25
2012
+44
+43
+38
+41
+42
+43
2013
−9
−3
−2
+9
−3
−6
2014
+68
+83
+85
+86
+71
+47
2015
+6
+17
+8
+11
+1
+1
2016
−5
−7
+5
+1
+4
0
2017
+55
+62
+65
+73
+77
+55
2018
−18
−14
−14
−17
−13
−8
2019
+9
+6
+7
+3
+2
+1
2020
+30
+35
+50
+38
+41
+42
2021
+68
+51
+55
+61
+69
+66
2022
−8
−3
0
−5
+1
−6
2023
+45
+58
+68
+64
+65
+54
2024
+30
+34
+33
+39
+43
+23
2025
+10
+1
+2
+10
+1
−12
The replica: NSE's calendar against all six combined
Growth of 1, monthly, log scale, price returns before costs.
How to read it. The heavier line is the replica on NSE's own months; the grey line splits money across all six calendars, which removes the luck of the draw without changing the expected return.
June and December (NSE's calendar)Split across all six calendars
Loading chart…
Source: NSE bhavcopy (main board), prices adjusted for corporate actions; liquid point-in-time universe; NSE Indices for Nifty200 Momentum 30.
How close is the replica? Its monthly returns on NSE's calendar correlate 0.91 with the real index over 257 months, above the 0.90 we required before naming the index. Its level is lower, though. It uses price returns without dividends. We have no free-float market values, so weights follow the momentum score alone, with NSE's 5% cap. Membership of the Nifty 200 is approximated by the 200 most-traded stocks. The spread between calendars is the finding; the exact returns are the replica's, not the index's. That NSE's calendar came out lowest is itself luck.
The tests
Written down before any result was computed.
MO-H1Has stock momentum paid in India?PassedYes. Stocks in the top fifth of the blend beat the bottom fifth by 1.8% a month on average since Nov 2004 (Newey-West t 4.7), in both halves of the sample. Held alone and after trading costs, the top fifth returned 26.0% a year against 13.7% for an equal-weighted basket of every liquid stock; deflated Sharpe 0.98 with 16 trials.
p-value, top fifth minus bottom fifth (Newey-West)bar 0.01710.10.010.0010.0001below 0.0001
p-values on a log scale; smaller is stronger evidence, to the right. Shaded: the side that passes the bar set in advance.
✓ Positive in the first half: met
✓ Positive in the second half: met
MO-H2Does blending the flavours beat the typical single flavour?FailedHalf. The blend's Sharpe ratio (1.01) beat the typical flavour's (0.93), but its worst fall (-59%) was deeper than the typical flavour's (-55%), so it fails the bar set in advance. Residual momentum on its own had the best Sharpe and the shallowest fall.
Sharpe ratio of the blendtypical flavour 0.931.01
Worst fall of the blend, %typical flavour −55%−59%
MO-H3Does momentum crash after the market has fallen for two years?FailedIt points that way but misses the bar. In the 28 months after the Nifty 500's two-year return turned negative, the long-short return averaged −2.01% a month, against +2.29% otherwise (p = 0.03; the bar was 0.017). Of the ten worst months, 6 were flagged, including the worst four.
p-value, flagged months against the rest (Welch)bar 0.01710.10.010.0010.00010.035
p-values on a log scale; smaller is stronger evidence, to the right. Shaded: the side that passes the bar set in advance.
MO-H5Does rotating into the sectors with the strongest blended momentum beat holding them all?FailedNo. 16.0% a year against 14.6% for an equal-weighted basket of 13 non-overlapping sectors since Feb 2005, after costs; ahead in 49% of months; deflated Sharpe 0.57 with 3 sector rules counted.
Deflated Sharpe ratio against the equal-weight basket, 3 trialsneeded 0.950.57
✓ Ahead in the first half: met
✗ Ahead in the second half: not met
MO-H4Which flavours bring the most variety?MeasuredThe least correlated pair is residual (stock-specific) 12-1 and nearness to 52-week high (0.36), as the literature suggests. Volatility-adjusted and plain 12-1 momentum are near-duplicates (0.97).
Tests, samples and pass bars were fixed in the pre-registered specification before any result was computed. A pass needs every condition written there, not only a small p-value.
How it is built
Every month-end, every liquid NSE main-board stock, using only data up to that day.
Universe. The same point-in-time universe as our breadth measures: main-board stocks with a median traded value of at least ₹1 crore a day (in today's rupees) and trades on 45 of the last 60 sessions, with at least 273 sessions of history. Stocks that later delisted are included while they traded, so there is no survivorship bias. Prices are bhavcopy closes adjusted for splits, bonuses and other corporate actions; dividends are not added.
The six flavours. 12-1 and 6-1 month returns (Jegadeesh and Titman, 1993); 12-1 divided by volatility (in the spirit of Barroso and Santa-Clara, 2015); residual momentum, the stock's own return after taking out the market's, over the same months (Blitz, Huij and Martens, 2011); nearness to the 52-week high (George and Hwang, 2004); and NSE's own normalised score. Industry momentum needs a point-in-time industry map, which we do not have. Earnings momentum waits for company financials.
Portfolios. Fifths by score, equally weighted, held one month. A stock that stops trading earns nothing after its last trade. The long-only version pays 0.25% each way on what it trades.
The rules across every market
The 10-month and 200-day rules were tested on seven markets. Here they are replayed on all 116 investable markets in the section, each over its own full history, after costs and tax. After tax the 10-month rule kept more than buying and holding on 32 of 116 and the 200-day rule on 27; the typical gap was -1.4 and -1.9 points a year. Their worst falls were shallower on 116 and 114. This is a description, not a test: the markets overlap, many histories are back-calculated, and with this many tries some markets would favour the rules by luck alone.
After tax, the 10-month rule mostly trailed buying and holding
Rule minus buy and hold, percentage points a year after tax, full history of each market. One dot per market; colour is the family.
How to read it. Right of zero the rule kept more after tax. Each family's best and worst are named; hover any dot for its name.
After tax, the 200-day rule mostly trailed buying and holding too
Rule minus buy and hold, points a year after tax.
What the rules did buy: shallower worst falls
The 200-day rule's worst fall minus buying and holding's, percentage points. Right of zero: shallower.
How to read it. Almost every dot is right of zero. This is what trend rules have reliably offered: a smaller worst fall, paid for with lower returns after tax.