ORMI IFTY beats NIFTY 50

The Extreme Reversion style is a passive index which is all invested. The ORMI India Extreme Reversion IFTY 50 has outperformed the Nifty 50 by 6% annualized since 2006. Though the style has not outperformed the sideways NIFTY action for the last 2 years, it has delivered 14% annualized over the last 7 years. Now that we are expecting a trending action on NIFTY, it would be a good time to watch the allocations on ORMI India Extreme Reversion IFTY 50.

ORMI IFTY

 

ORMI IFTY PERFORMANCE

Indexing: The Orpheus Risk Management Index (ORMI) is based on proprietary algorithm.

The indices values that are disseminated today are broadly based on market capitalization methodology. Market capitalization methodology has been challenged globally for a few broad reasons. 1) As an asset strengthens it is given more weight 2) As an asset weakens it is given lesser weight. This on one side captures momentum but on the other side suggests investors to focus more on growth compared to value. This increases portfolio risk when market growth slows down or reverses, as has been the case since 2007. When markets contract, the erstwhile top performers push into red for extended period of time causing large drawdowns and emotional pain.

The ORMI Indices based on the above extreme reversion idea i.e. outliers tend to reverse, which suggests that investing is about value picking and extremes are prone to reversion. Our Index extends and fine tunes the idea first mooted by De Bondt and Thaler in their 1981 paper suggesting that 3 year worst losers portfolio tends to outperform the 3 year best winners portfolio.

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