Active India 30 @ 15% Cash


The ORMI 30 is now nearly 15% cash and has 25 components. This is positive. The current new entries for ORMI India Active 30 are…

Why is ORMI India 30 key to track?

This ORMI Active India model is the top performer with more than 35% annualized gains on average. Moreover, the model has 30 selected components from the BSE 500 universe and hence it has a low correlation compared to the universe. The model does not just select small cap. The selection is a due mix of different market capitalization components. The ORMI India Active 30 model is just 16% standard deviation compared to 27% Standard deviation on Nifty. We don’t think the sideways action is going to continue in ORMI India Active 30 model. The model could be ready to finally trend. Sooner than later odds should catch up.

Why do Active midcap has 10 components while the extreme reversion and midcap has 92 scrips each? What instruments can the retail client use to invest? Will these models be updated frequently? Are we resetting limits for the max allocation in Mid Cap?

ORMI Styles ORMI Styles Active is absolute return while passive (relative and extreme reversion) are relative return (Indices that mirror the respective benchmarks). This is why active is selection of 10 or 30 investible ideas while passive (relative and extreme reversion) are mirroring of the universe (comparative benchmark). In case the universe is small like Sensex 30 stocks, an investor can invest in passive styles also. But in case the comparable universe is 100 stock, investors will have to use an ETF or a fund mechanism to invest. One passive style i.e. worst 20 also offers an investible list of stocks and can be used by the retail investor looking at ORMI India Active 10 and ORMI India Active 30. All our models will be disemminated from EconoHistory on an End of Day basis. We have reset the maximum allocations for mid cap again to not have more than 10% in any component at any time. Enjoy the latest ORMI.

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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