The tendency of stocks that have outperformed in the past 6–12 months to continue outperforming in the near future one of the most robust anomalies in Indian equity markets.
Price momentum is the phenomenon where stocks that have generated the highest returns over the past 6 to 12 months tend to continue outperforming over the following 3 to 12 months. In BossInvestor's analysis of 1,500+ Indian stocks over 8 years (2018–2025), the top momentum decile outperformed the equal-weight universe by an average of 18.4 percentage points per year. The bottom decile underperformed by 12.6 percentage points annually. The spread between the top and bottom decile 31 percentage points is the momentum factor premium captured by systematic momentum strategies.
The academic basis for momentum is strong. The original work by Jegadeesh and Titman (1993) documented momentum in US equities. In Indian markets, the anomaly is particularly pronounced because retail investor behaviour amplifies it investors buy stocks after they have already risen significantly (recency bias), pushing momentum stocks further up before mean-reversion eventually occurs. The key insight BossInvestor exploits is the holding period: momentum is strongest over 3–12 months forward, and weakest at the 1-month mark (short-term reversal) and beyond 18 months (mean reversion). This is why the BossInvestor momentum screen measures both 6-month and 12-month return simultaneously both must be in the top 40th percentile, not just one.
Momentum's relationship with market regimes is important to understand. In Bull and Recovery regimes, momentum is the strongest-performing factor the premium averages 26 percentage points above benchmark in bull markets and 22 percentage points in recovery phases. In Correction regimes, momentum stocks fall harder than the market because they were the most bought-up names. The Dynamic Allocator model's reduce signals (September 2024: −50%, January 2026: −10%) are specifically calibrated to reduce momentum exposure ahead of correction regimes, protecting the portfolio from the momentum crash that typically follows VIX spikes. This is not prediction it is systematic regime awareness.