Discover which funds are outperforming and why they matter now
Momentum mutual funds have gained attention in India due to their ability to take advantage of strong-performing stocks. These funds follow a simple idea: invest in stocks that have performed well in the recent past and are likely to continue rising in the short term.
In 2025, momentum-based mutual funds saw increased interest. Several new fund offers (NFOs) launched, and some older funds delivered attractive returns. This article explores the best momentum mutual funds in India, explains how they work, and highlights their risks and opportunities.
What Are Momentum Mutual Funds?
Momentum mutual funds invest in stocks that have shown a steady rise in their prices over recent months. These funds believe that stocks that are going up will continue going up, at least for a while. Fund managers or index rules select these stocks based on their recent price trends and add them to the fund’s portfolio.
These funds use data, technical indicators, and performance rankings to pick stocks. Unlike regular equity funds that follow sectors or themes, momentum funds focus only on stock performance over time.
New Launch: SBI Nifty200 Momentum 30 Index Fund
In June 2025, SBI Mutual Fund launched a new index fund focused on momentum stocks. The fund tracks the Nifty200 Momentum 30 index, which includes 30 stocks from the Nifty 200 that showed the highest recent gains.
This new fund gave investors another option to invest in momentum stocks passively, without the need for active stock-picking. It closed its initial offer in early July and now operates like a regular index fund.
Top Momentum Mutual Funds in India
Several mutual funds already use momentum strategies. Some are index-based, while others use custom models. Here’s a closer look at the top performers.
1. Axis Nifty500 Momentum 50 Index Fund
This fund tracks the Nifty500 Momentum 50 Index.
It includes 50 stocks from the Nifty 500 that have shown strong price movement.
In the last one year, the fund delivered returns around 13.6%.
It holds a mix of large-cap and mid-cap stocks.
The fund has over ₹1,700 crore in assets under management.
2. Edelweiss Nifty Midcap150 Momentum 50 Index Fund
This fund focuses on mid-cap momentum stocks.
It selects 50 stocks from the midcap index that have performed well recently.
The one-year return stands around 14.9%, making it one of the best.
With nearly ₹1,000 crore in assets, it has become popular among investors.
3. Motilal Oswal Nifty200 Momentum 30 Index Fund
This fund tracks the Nifty200 Momentum 30 Index.
It holds the top 30 stocks from the Nifty 200 based on momentum.
The fund has ₹900+ crore in assets.
Though the fund performed well over time, it saw a drop of about 25% in 2024, showing how volatile these strategies can be.
4. ICICI Prudential Nifty200 Momentum 30 Index Fund
This fund also follows the Nifty200 Momentum 30 Index.
With ₹550 crore in assets, it provides good liquidity and size.
The fund returned about 13.2% over the last year.
5. Quant Momentum Fund
Unlike index-based funds, Quant Mutual Fund uses its own custom model to choose momentum stocks.
It ranks stocks using proprietary methods and holds a dynamic mix of names.
This fund has grown fast and now manages over ₹91,000 crore.
It takes more risk, but many investors have seen strong returns.
How Have Momentum Funds Performed?
Momentum funds have shown solid returns in 2025. Most top funds delivered over 13% to 15% in one year. Midcap-based funds did even better than large-cap ones. For example, Edelweiss’s midcap momentum fund returned close to 15%, higher than other large-cap focused funds.
Strong stock market performance in India also helped these funds. The Nifty 50 index rose by about 2.9% in June, and small-cap and mid-cap stocks did even better. This rising market gave momentum strategies the perfect setup to shine.
Why Are Investors Choosing Momentum Funds?
Many investors started avoiding sectoral and thematic funds due to inconsistent results and higher risk. Momentum funds, on the other hand, follow a rules-based method that avoids emotional decisions. These funds don’t depend on sectors or themes. They pick stocks only based on performance.
Investors looking for trend-based strategies with less human bias now prefer momentum funds. Also, with more fund houses launching passive momentum funds, investors now have more low-cost options to choose from.
Risks to Consider
While momentum funds can deliver high returns, they also come with some risks:
1. High Volatility
Momentum stocks rise fast but also fall sharply. The same traits that make them grow can make them unstable. As seen in 2024, some funds saw large drawdowns in a short period.
2. Short-Term Focus
Momentum funds follow short-term trends. If those trends reverse, the fund performance suffers quickly. Investors need to remain patient during corrections.
3. Tracking Error (for Index Funds)
Index-based momentum funds might not always match the index returns exactly due to small differences in portfolio construction and timing.
4. Not for Every Investor
These funds suit investors who can handle ups and downs. Those looking for stability or income may not find these funds suitable.
Taxation and Costs
Momentum mutual funds follow equity taxation rules:
Short-term capital gains (STCG) taxed at 15% if sold within one year.
Long-term capital gains (LTCG) taxed at 10% beyond ₹1 lakh per year.
Most index-based momentum funds charge low expense ratios, between 0.3% and 0.5%. Active funds like Quant may charge more, depending on the model and management.
What Lies Ahead?
Momentum investing continues to grow in India. More fund houses now launch momentum-based index funds. Investors find these funds easier to understand and manage compared to active strategies. Midcap momentum funds show higher returns, but they also bring higher risk.
With India’s markets in a positive trend, momentum funds are likely to continue performing well in the near term. But investors must keep expectations realistic. Not all years will deliver double-digit returns. Holding for at least 1–3 years is important to see full results.
Momentum mutual funds offer a smart way to benefit from trending stocks in Indian markets. With more fund options, both active and passive, investors now have greater access to this strategy. Funds like Axis, Edelweiss, and Quant have shown strong leadership in this space.
Investors must consider their risk tolerance and investment horizon before entering momentum funds. When used wisely, these funds can become a powerful part of a diversified portfolio—helping capture trends without needing constant attention.