Size, Value and Momentum Returns in Indian Stock Market

Abstract

The study investigates the applicability of factor-based investing in the Indian stock market, particularly focusing on the size, value, and momentum factors. Using data from 2005 to 2022 and employing the Fama-French methodology, the research examines the performance of these factors and their impact on investment returns. The findings reveal that while the size factor yielded negative returns, both the value and momentum factors exhibited positive performance. Notably, momentum emerged as the most effective strategy, delivering substantial returns and outperforming other factors. Additionally, the study analyzes the Equity Risk Premium (ERP), indicating insignificant real returns in the market during the study period. Drawdowns and volatility are assessed for each factor, highlighting the inherent risks and fluctuations associated with factor based investing. The research emphasizes the significance of integrating factor analysis in investment strategies and provides insights into the dynamics of the equity segment of Indian capital market.