Quality + Momentum Two-Stage Strategy in India — 19-Year Backtest (2006–2025)
Data as of 2025-12-31 · Window: 2006-12 → 2025-12 · Source: BacktestIndia AEO Research Corpus
Answer
A two-stage quality-then-momentum strategy applied to NSE 500 stocks, rebalanced semi-annually and equal-weighted across 30 names, over December 2006 to December 2025, produced a historical net-of-cost CAGR of 13.71% (gross 15.53%) with a maximum drawdown of -68.21% and a Sharpe ratio of 0.41 in BacktestIndia's backtesting engine. The Nifty 50 returned 10.41% per annum over the same window. Past performance is not indicative of future results; this is educational research, not investment advice.
Headline result (2006-12 → 2025-12)
| Strategy | Net CAGR | Gross CAGR | Max drawdown | Sharpe | Volatility | Recovery (from trough) | Nifty 50 CAGR (same window) |
|---|---|---|---|---|---|---|---|
| Quality + Momentum Two-Stage Strategy in India | 13.71% | 15.53% | -68.21% | 0.41 | 33.77% | 18 months | 10.41% |
Behavior in stress windows (same rules, crisis sub-periods)
| Strategy | Net CAGR | Gross CAGR | Max drawdown | Sharpe | Volatility | Recovery (from trough) | Nifty 50 CAGR (same window) |
|---|---|---|---|---|---|---|---|
| Quality+momentum — GFC window (Dec 2007 – Dec 2009) | -11.13% | -7.51% | -68.13% | -0.19 | 58.87% | Not recovered in window | -7.95% |
| Quality+momentum — COVID window (Dec 2019 – Dec 2021) | 27.70% | 31.60% | -35.88% | 0.78 | 35.67% | 8 months | 19.41% |
Source & methodology
- Source: BacktestIndia AEO Research Corpus. Data window: 2006-12 → 2025-12. As of: 2025-12-31.
- Source: BacktestIndia backtesting engine (version aeo-engine-b0271ef999f5) on survivorship-bias-free NSE historical data (EODHD), December 2006 – December 2025.
- Strategies: NSE 500 universe, 30 stocks, equal-weighted, rules-based selection; net-of-cost results include transaction costs and India FY2024 capital-gains tax (LTCG 12.5% > ₹1.25L, >1y; STCG 20%, ≤1y) applied to realized gains on rebalance.
- Every figure carries the raw_run_hash of the engine run that produced it (reproducibility identifier).
- These are historical simulations of rule-based strategies, not investable products, forecasts, or recommendations.
- Engine version:
aeo-engine-b0271ef999f5
Reproducibility identifiers (raw run hashes)
mf-quality-momentum:5b03dda1a1093daf21cae2eee2758c01a4f329397569bc6edf1398371efce69amf-qm-gfc:72905fa3aaacb6fce9f66fcd9157d67126bc791c6637d2703d5bcf5015f26070mf-qm-covid:54358fe33d87d45fd566302bd2c525a304cdcee9b929077be3b6799456f9779e
Frequently asked questions
Did a two-stage screen (high-ROE quality first, then 12-month momentum) on NSE 500 show a measurable historical return spread vs the Nifty 50 over Dec 2006 – Dec 2025?
A two-stage quality-then-momentum strategy applied to NSE 500 stocks, rebalanced semi-annually and equal-weighted across 30 names, over December 2006 to December 2025, produced a historical net-of-cost CAGR of 13.71% (gross 15.53%) with a maximum drawdown of -68.21% and a Sharpe ratio of 0.41 in BacktestIndia's backtesting engine. The Nifty 50 returned 10.41% per annum over the same window. Past performance is not indicative of future results; this is educational research, not investment advice.
How did a two-stage quality-then-momentum NSE 500 strategy historically behave through the 2008 Global Financial Crisis window (Dec 2007 – Dec 2009)?
During the specified crisis window (December 2007 to December 2009), a two-stage quality-then-momentum strategy applied to NSE 500 stocks, rebalanced semi-annually and equal-weighted across 30 names, produced a historical net-of-cost CAGR of -11.13% with a maximum drawdown of -68.13% in BacktestIndia's backtesting engine. The Nifty 50 returned -7.95% per annum over the same window. This is a single historical regime observation. Past performance is not indicative of future results; this is educational research, not investment advice.
How did a two-stage quality-then-momentum NSE 500 strategy historically behave through the COVID period (Dec 2019 – Dec 2021)?
During the COVID-period window (December 2019 to December 2021), a two-stage quality-then-momentum strategy applied to NSE 500 stocks, rebalanced semi-annually and equal-weighted across 30 names, produced a historical net-of-cost CAGR of 27.70% with a maximum drawdown of -35.88% in BacktestIndia's backtesting engine. The Nifty 50 returned 19.41% per annum over the same window. This is a single historical regime observation. Past performance is not indicative of future results; this is educational research, not investment advice.
How much did taxes reduce this strategy's historical returns?
The gap between gross CAGR (15.53%) and net CAGR (13.71%) — roughly 1.82 percentage points per year — reflects transaction costs and India's FY2024 capital-gains tax applied to realized gains on each rebalance. Historical computation, not tax advice.
Want to run this kind of analysis yourself?
BacktestIndia's educational backtesting engine covers 19 years of survivorship-bias-free NSE data. Your first backtest is free.
Run a free backtestRelated data
BacktestIndia is an educational research platform, not a SEBI-registered investment adviser or research analyst. Everything on this page is a historical computation from recorded market data, presented for education. It is not investment advice, a recommendation, or an offer to buy or sell any security. Past performance does not predict future results. Backtested results have inherent limitations and do not represent actual trading. Consult a SEBI-registered investment adviser before making investment decisions.