The strategy trades Nifty 50 futures, using momentum signals, 60-minute rebalancing, and risk-budgeting to maintain 15% annualized risk, scaling weights for systematic allocation without optimization.
ASSET CLASS: futures | REGION: India | FREQUENCY:
Intraday | MARKET: equities | KEYWORD: Momentum
I. STRATEGY IN A NUTSHELL
Trades Nifty 50 futures using a 3-day lookback and 60-minute rebalancing, going long on positive momentum and short on negative momentum. Risk budgets are proportional to indicator strength, with total risk capped at 15% annually.
II. ECONOMIC RATIONALE
Intraday momentum exploits behavioral biases like herding and underreaction, capturing short-term price trends. Frequent rebalancing enhances returns but requires balancing against trading costs for sustainable performance.
III. SOURCE PAPER
Momentum in the Indian Equity Markets: Positive Convexity and Positive Alpha [Click to Open PDF]
Sonam Srivastava, Gaurav Chakravorty, and Mansi Singhal — Wright Research; Qplum
<Abstract>
We present effective momentum strategies over the liquid equity futures market in India. We evaluate and determine the persistence of the returns at various look-backs ranging from quarterly and weekly to more granular look-backs. We look at a universe of the liquid equity instruments traded across the Indian markets to evaluate this anomaly. We evaluate momentum across the two datasets based on frequency – daily data and intraday bar data. On the daily scale we compare momentum with other style factors. In the intraday scale we evaluate time series momentum or absolute momentum and cross-sectional momentum or relative momentum. We demonstrate that at the optimal horizon, momentum strategies on securities in India can be a source of uncorrelated alpha. We use active risk-budgeting at a given target risk for portfolio construction. We will show in a separate publication how it outperforms mean-variance optimization.
IV. BACKTEST PERFORMANCE
| Annualised Return | 12.36% |
| Volatility | 12.81% |
| Beta | N/A |
| Sharpe Ratio | 0.96 |
| Sortino Ratio | N/A |
| Maximum Drawdown | -13.44% |
| Win Rate | N/A |
