Top Momentum ETFs in India: Meaning, Taxation and Advantages

Momentum ETFs are exchange-traded funds that invest in stocks showing strong recent price performance. These ETFs usually track a momentum-based index, where companies are selected and weighted based on factors such as past returns, price strength, and relative performance. In India, Momentum ETFs may track indices such as the Nifty 200 Momentum 30 Index or other momentum-based indices. They offer a passive way to invest in stocks with strong market momentum, but their performance can change quickly when market trends reverse.

1. HDFC Nifty200 Momentum 30 ETF: This ETF tracks the Nifty 200 Momentum 30 Index, offering exposure to 30 large and mid-cap stocks selected for strong price momentum.
2. ICICI Prudential Nifty 200 Momentum 30 ETF: This ETF passively follows the Nifty 200 Momentum 30 Index, investing in companies with relatively strong recent price performance across the Nifty 200 universe.
3. ADITYA BSL Nifty 200 Momentum 30 ETF: This ETF aims to track the Nifty 200 Momentum 30 Index, providing investors with exposure to selected momentum-driven stocks within the Nifty 200.
4. Groww Nifty 500 Momentum 50 ETF: This Nifty 500 Momentum 50 Index ETF tracks 50 stocks from the wider Nifty 500 universe, selected based on momentum scores.
5. Angel One Nifty Total Market Momentum Qlty 50 ETF: This ETF tracks a momentum- and quality-based index, selecting 50 stocks from the broader listed market based on both price momentum and quality factors.

Investing in Momentum ETFs in India is straightforward:

1. Open a demat/trading/stockbroker account. You can open a demat account with smallcase!
2. Investors can use the Tickertape Stock Screener to analyse the list of Momentum ETFs and compare them to identify the best Momentum ETF in India based on various factors.
3. Place a buy order.

Momentum ETFs in India usually invest mainly in domestic equity shares. Hence, they are generally taxed as equity-oriented funds. The tax treatment depends on the holding period and the type of income.

• Short-Term Capital Gains: If Momentum ETF units are sold within 12 months, the gains are treated as short-term capital gains. These gains are taxed at 20%.
• Long-Term Capital Gains: If Momentum ETF units are held for more than 12 months, the gains are treated as long-term capital gains. Long-term capital gains above ₹1.25 lakh in a financial year are taxed at 12.5%.

• Momentum-Based Stock Selection: Momentum ETFs track indices that select stocks based on recent price strength. For example, the Nifty200 Momentum 30 Index selects 30 companies from the Nifty 200 based on 6-month and 12-month price returns, with volatility adjustments.
• Different Index Universes: Momentum ETFs may track different momentum indices. The Nifty200 Momentum 30 Index covers 30 stocks from the Nifty 200, while the Nifty500 Momentum 50 Index covers 50 stocks from the wider Nifty 500 universe.
• Tilt-Weighted Structure: These ETFs do not follow plain market-cap weighting. In the Nifty200 Momentum 30 Index, stock weights are based on free-float market capitalisation multiplied by the normalised momentum score.
• Semi-Annual Rebalancing: Momentum indices are typically rebalanced every 6 months. The Nifty200 Momentum 30 Index and Nifty500 Momentum 50 Index are rebalanced twice a year, helping the portfolio adjust to changing market trends.
• Sector Rotation: Momentum ETFs can have changing sector exposure. As of June 2026, the Nifty500 Momentum 50 Index had high exposure to capital goods, financial services, healthcare, metals and mining, and power.

• Rule-Based Momentum Exposure: Momentum ETFs provide passive exposure to stocks that have shown relatively strong price performance. This removes the need to manually identify momentum stocks one by one.
• Access to Large and Mid-Cap Momentum Stocks: ETFs tracking the Nifty200 Momentum 30 Index offer exposure to 30 high-momentum stocks from large and mid-cap companies. This can help investors access a focused factor-based strategy through a single ETF.
• Wider Market Coverage: ETFs tracking the Nifty500 Momentum 50 Index provide exposure to 50 momentum stocks from a broader universe. As of June 2026, the index included sectors such as capital goods, financial services, healthcare, metals, power, automobiles, and telecom.
• Automatic Portfolio Refresh: Since momentum indices are rebalanced semiannually, stocks with weakening momentum may be removed, and stocks with stronger momentum may be added. This keeps the ETF aligned with the index methodology.
• Exchange-Traded Structure: Momentum ETFs trade on stock exchanges like shares. Investors can buy or sell units during market hours, subject to liquidity, bid-ask spreads, and market price movements.

• Trend Reversal Risk: Momentum ETFs can fall sharply when market leadership changes. Stocks that performed well in the past may underperform if sector trends, earnings expectations, or market sentiment reverse.
• Higher Volatility: Momentum indices can be more volatile than broad-market indices. As of June 2026, the Nifty200 Momentum 30 Index had a P/E ratio of 25.22%.
• Sector Concentration Risk: Momentum ETFs may become concentrated in sectors that are currently performing well. As of June 2026, capital goods alone formed 32.90% of the Nifty500 Momentum 50 Index.

• Underlying Momentum Index: Momentum ETFs may track indices such as Nifty200 Momentum 30, Nifty500 Momentum 50, or Nifty Total Market Momentum Quality 50. Each index has a different stock universe, selection method, and risk profile.
• Stock Selection Method: Some indices select stocks based on 6-month and 12-month price returns adjusted for volatility, while others combine momentum with quality factors. This affects the ETF’s portfolio composition.
• Sector Concentration: Momentum ETFs can become concentrated in sectors showing strong recent performance. As of June 2026, capital goods formed 32.90% of the Nifty500 Momentum 50 Index.
• Volatility and Trend Reversal Risk: Momentum ETFs may be more volatile than broad-market ETFs. Their performance can change quickly when market leadership shifts or high-momentum stocks correct.
• Tracking Error and Liquidity: ETF returns may differ from index returns due to expense ratios, tracking error, cash holdings, and liquidity. Bid-ask spreads can also affect buying and selling prices.