Momentum Is Hurting. Here's What That Pays For.

A note from Jimeet Modi  ·  April 2026

On 13 March 2025, the NIFTY 500 Momentum 50 closed 30.9% below its peak of 27 September 2024. As I write this in late April 2026, it has not yet recovered. By the data we have on Indian factor performance going back to April 2005, this is the deepest drawdown for Momentum 50 since the 2018 mid-cap crash — and the fourth-deepest of the 21-year record overall, exceeded only by the 70.2% drawdown of the 2008 Global Financial Crisis (GFC), the 38.1% drawdown of the 2018–2020 episode, and the 34.7% drawdown of 2006.

I want to write about it, plainly, while it is happening.

Most of what gets published about a fund's strategy is usually published when the strategy is winning. That is mostly the easier writing. What I owe our unitholders, our distributors, and anyone else who has been reading us for any length of time is the harder version: the one done while the strategy hurts.

Here is the central thing I want to argue, and I will return to it from several angles:

The premium that long-term momentum investors may eventually earn is being paid for, in real time, by the investors who hold through this drawdown. That is what drawdowns are. They are how the premium is funded.

Let me explain what I mean.

Two Premia, One Discipline

When someone moves money from a fixed deposit to an equity mutual fund, they are buying access to the equity risk premium — the additional return that equities have historically delivered, on average, over what FDs and government bonds pay. Across long horizons in Indian markets, that premium has compounded into a meaningful per-annum gap.

That premium is not free. It exists because equities can fall, sometimes a lot, and stay fallen for years. The 2008 Global Financial Crisis took the NIFTY 500 down 75.6% from peak to trough; it did not recover its January 2008 level until June 2014. That is six and a half years of below-water investing for anyone who bought near the crash. The equity risk premium is the price the market pays the patient minority for sitting through episodes like that.

Most investors, when they first buy equity, intend to be that patient minority. Most discover, in the first 25%-down episode of their investing life, that they are not. They usually convert their loss into a permanent loss by selling at the bottom. The equity premium passes them by.

Now consider what we do at SAMCO Mutual Fund. We do not just buy equities. We buy a particular kind of equity — the equities whose price is in a sustained uptrend, ranked and rebalanced by a system that does not consult anyone’s view. We are running a momentum strategy.

The momentum strategy carries its own additional premium above and beyond the equity premium. In our 21 years of Indian factor data, NIFTY 500 Momentum 50 has compounded at 21.2% per annum against NIFTY 500’s 15.0% — a 6.2-percentage-point spread, every year, sustained across two decades. ₹1,000 invested in the NIFTY 500 in April 2005 grew to ₹18,800 by March 2026. The same ₹1,000 invested in NIFTY 500 Momentum 50 grew to ₹56,600. Almost three times the wealth.

That is the momentum risk premium. And it is not free either. It exists because momentum, as a factor, has its own drawdowns — drawdowns that occur even when the equity premium itself is fine. There were 13 such drawdowns of 10% or more in our 21-year record. The median lasted 36 trading days from peak to trough and 85 trading days from trough back to recovery — about five and a half months in total. The deepest, in 2008, took 5.6 years to recover. The current one, at 30.9% peak-to-trough, has lasted 18 months from peak with no recovery yet.

So a momentum investor, properly understood, is buying two premia stacked on top of each other. The first compensates them for sitting through equity drawdowns of the kind FD-investors will not sit through. The second compensates them for sitting through momentum drawdowns of the kind broad-equity investors will not sit through.

Both premia are paid for the same behaviour, applied twice. The patient minority gets paid for being patient about equities. The doubly-patient minority — patient about equities, and also patient about momentum within equity — gets paid for both.

This is the only honest framing I know for what we are asking unitholders to do.

Where This Drawdown Sits on the Map

Without a historical map, every drawdown feels uniquely terrible. With the map, you can locate it and see what it actually is.

Here is the map for NIFTY 500 Momentum 50 over twenty-one years — every drawdown of 10% or more, ranked by depth.

Three observations stand out.

First, this drawdown is severe but not unprecedented. It ranks among the four deepest of the 21-year record, but to be unprecedented it would have to break the −70.2% of October 2008. We are 39 percentage points away from that benchmark.

Second, this drawdown is unusually long. The median momentum drawdown lasts roughly five and a half months from peak to recovery. We are at eighteen. Only two episodes in the data have lasted longer — the 2008–2014 GFC episode (5.6 years) and the 2018–2020 mid-cap-then-COVID episode (just over two and a half years).

Third — and this is the one that has surprised me most as I have lived through it — this is the first major drawdown in our record where Momentum is underperforming the broad market in the decline phase. In the four major bear markets in the data — 2008 GFC, 2018 mid-cap crash, 2022 inflation episode, and now 2024–26 — Momentum has previously either modestly outperformed Nifty 500 (2008: +4.9pp ahead through the decline) or substantially outperformed (2018: +23.9pp ahead, the largest cyclical cushion in the record). Right now, it is 5.9pp behind.

That is new. It does not invalidate the premium, but it is a fact I owe the reader on the same page as the long-run number.

The Numbers That Argue Both Sides

I want to give the strongest version of two arguments and let them stand next to each other.

The argument for staying in.

● 21.2% vs 15.0% CAGR over 21 years. That is the entire investible record of Indian momentum-factor data, and the spread is large enough to be unmistakable.

● In 93.1% of all rolling five-year windows in our data, NIFTY 500 Momentum 50 outperformed NIFTY 500. The median five-year cumulative outperformance is 59.9%.

● During the 2018 mid-cap crash — the single most painful Indian equity episode of the past decade for retail investors — Momentum 50 fell 35.9% against Nifty 500’s 59.8%. That is a 23.9-percentage-point cushion through the crash retail investors actually remember.

● The full 2018-to-2021 cycle — peak to recovery — produced +45.8% for Momentum against +0.6% for the NIFTY 500. A 45-point cycle outperformance.

The argument against — and I want to write the strongest version, the version a thoughtful sceptic would make.

The momentum recovery lag is real, and it is the strongest empirical attack on the strategy. After the 2008 GFC, when the NIFTY 500 returned 117.4% in calendar 2009, NIFTY 500 Momentum 50 returned 61.3% — 56 percentage points behind. By the time both indices recovered to pre-crisis peak in mid-2014, Momentum’s full-cycle return (Jan 2008 to June 2014) was 0.4 percentage points behind the broad market. In the worst cycle our data has produced, momentum did not just give up its premium — it paid one.

This pattern has a name in academic finance. Daniel & Moskowitz (2016) documented it for global momentum and called it “momentum crashes” — the phenomenon where, after a sharp market reversal, momentum’s still-stale exposures ride the wrong basket down for some time before re-selecting from the new leaders. We can see exactly the same pattern in the MSCI World Momentum Index. From March to December 2009, World Momentum returned 44.8% against MSCI World’s 66.9% — a 22-point lag.

So the honest case against momentum is not that it does not work. The honest case is that it works on average across cycles, but in the single worst cycle the data has produced, it produced no premium at all. We owe the reader that statistic, on the same page as the 21.2%, every time.

Why We Still Don’t Override

If the recovery lag is real, and if the current drawdown is one of the four deepest in our record, and if Momentum is — for the first time in twenty-one years — underperforming the broad market through a decline phase, why are we not adjusting?

I have asked myself this question more than once in recent months. Here is the honest answer.

The case for overriding is always: “This time, we have information the system does not have.” The case against is that we have asked that question many times, and the data says we are usually wrong about what the system is missing.

I do not run our momentum strategy with a discretionary toggle that I can pull when it hurts. There is no toggle. There are only the rules-based exception protocols we published last year — pre-coded responses to liquidity collapses, corporate actions, regulatory caps, concentration limits. Each of those has triggered cleanly through this drawdown, just as each was triggered through 2008 and 2018. None of them has been a discretionary intervention.

This is the part that has to be earned over multiple cycles before it sounds like anything other than a slogan: the Doctrine is not a slogan. It is the operational discipline of not having a toggle to pull, on the day when one would feel most useful to pull.

That feeling — “I should be doing something” — is one of the most reliably costly behaviours in active investing across decades and across markets. It is felt sincerely, every time. It is wrong on average, every time. We have made it our business not to feel it.

What This Means for Investors Today

I will keep this part short, because it is the part where most asset managers reach for promotion.

Three observations, no recommendations.

1. Pausing a SIP at the bottom of a momentum drawdown converts a drawdown into a potential missed recovery. This is the same arithmetic as pausing an equity SIP in 2008. The investors who held their NIFTY 500 SIP through 2008–09 saw it recover by 2010 and compound to several multiples of principal by today. The investors who paused in early 2009 did not.

2. Five years is the empirical patience threshold. Below that, momentum’s outperformance is probabilistic. At and above it, the data shows 93% of five-year windows favouring momentum. If the holding horizon is shorter than five years, momentum is the wrong product. If it is longer, this drawdown is exactly the kind of episode the long horizon was bought to absorb.

3. The behaviour gap is the only cost the long-term investor truly controls. Expense ratios are small. Tax drag is largely unavoidable. The behaviour gap — the difference between what an investor’s strategy returns and what the investor actually earns from it — has historically been a major drag on potential retail equity returns, and we have no reason to believe it is smaller for a more volatile factor like momentum.

My family and myself hold investments in our funds. I am, in real time, holding through the drawdown I am writing about. That should not move anyone’s investment decision — my doing this is one observation, not data — but it is the one piece of information I can offer that no spreadsheet can.

The equity premium is paid to investors who hold through drawdowns. The momentum premium is paid to those same investors, a second time, for holding through a second kind of drawdown. This is the moment when the second instalment falls due.
Follow Momentum. Trust the System. Never Override.

— Jimeet Modi

Founder & Group CEO, SAMCO Group  · Chair, Investment Committee, SAMCO Mutual Fund

The data cited in this note is drawn from SAMCO factor research covering NIFTY 500 Momentum 50, Quality 50, LowVol 50, Value 50 and NIFTY 500 daily levels from 1 April 2005 through 30 March 2026, supplemented by MSCI World Momentum Index and MSCI World Index daily data from 1 January 1997 through 27 April 2026. Index returns shown are gross of fund-level expenses, transaction costs, and taxes; live fund returns will sit below these figures by the relevant cost of implementation. Past performance is not indicative of future returns.

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