Create your own low volatility, momentum stock list with this NSE download

Published: January 5, 2019 at 8:43 am

Last Updated on

Here is how you can create your own low volatility, momentum stock list with this download from the NSE published each month. Each month I hope to publish such a list (see: Nine momentum stocks with low volatility for 2019), but here is how you DIY this.

What is the meaning of momentum stock?

Momentum investing essentially means identifying stocks that have moved up considerably in the past 6-12 months and investing them in the hope that the trend will continue into the future. It is hope on the basis of past research as discussed here for the Indian and US markets: Momentum Stock Investing in India: Does it work?.

What is the meaning of a low volatility stock?

Low volatility investing refers to identifying stocks with low price fluctuations and investing in them. Again this is based on past evidence: Low volatility stock investing: Does it work? Higher returns at lower risk?

As discussed in the first link above, there is a close connection between momentum investing and low volatility. In fact, most momentum stock picking strategies also include a way to filter out stocks based on volatility. That is, they prefer stocks that have moved up in the past (= momentum) with low volatility. Another idea that is closely related is to hunt for stocks that have stayed close to their all-time price highs.

Warning: Whether you choose stocks with momentum or low volatility or both, it is important to recognise when to sell the stocks. This kind of trend following requires serious levels of discipline and commitment.  You should be able to buy a stock without question and sell it without question if it no longer has enough momentum and/or low volatility.  If you get distracted by the valuation of the stocks, their ROE etc and hesitate or buy more than necessary it will not work. Please do not blindly use this list to buy and clutter your portfolio.  Do your own research about momentum and low volatility investing!!
Create your own low volatility, momentum stock list with this NSE download

How to create your own low volatility momentum stock list

Step 1: Go to the latest NSE monthly report

Step 2: Download the market cap, weight and beta for Nifty 50 and Nifty 100.

How to create your own low volatility momentum stock list from NSE monthly reports

Step 3: Combine the two lists together and turn on Excel data filter (click the funnel icon on the data tab)

This is how each list would look:

list of market capitalization and volatility of Nifty 50 stocks

You will get:

  • weightage in the index
  • free float market capitalization
  • Beta a measure of how volatile the stock is with respect to the index (Nifty or Nifty next 50)
  • Volatility: a measure of absolute volatility of fluctuation in daily price of the stock
  • R2 or R-squared a measure of how much the stock price movement is correlated to that of the index. Beta is useful only if R2 is high.
  • monthly return
  • average impact cost which is a measure of the stocks liquidity

The beta, R2 and volatility is measured for the last one year trailing. So if we get the Dec monthly report the calculation will be from Jan 1st to Dec 31st of that year.

Step 4:  Now we start the analysis. The highest R2 is only 0.44 and it drops rapidly below that. This means that no individual stock movement correlates well with that of the index. This also means that the beta values are not of much use.

Step 5:  Sort the data by ascending or descending volatility and choose the top 10 or 20 or 30 stocks with lowest volatility

Procter & Gamble Hygiene & Health Care Ltd.
HDFC Standard Life Insurance Company Ltd.
HDFC Bank Ltd.
Tata Consultancy Services Ltd.
I T C Ltd.
Container Corporation of India Ltd.
ICICI Bank Ltd.
The New India Assurance Company Ltd.
State Bank of India
Bharti Infratel Ltd.
Cipla Ltd.
Hindustan Zinc Ltd.
IndusInd Bank Ltd.
Petronet LNG Ltd.
Larsen & Toubro Ltd.
Cadila Healthcare Ltd.
Power Grid Corporation of India Ltd.
Tech Mahindra Ltd.
Oil & Natural Gas Corporation Ltd.
Reliance Industries Ltd.
Britannia Industries Ltd.
ABB India Ltd.
SBI Life Insurance Company Ltd.
Oil India Ltd.
Dr. Reddy’s Laboratories Ltd.
Bank of Baroda
Bosch Ltd.
Hindustan Unilever Ltd.
Bharat Petroleum Corporation Ltd.

Step 6: Download the trailing returns data for Nifty 100 from Value Research

Step 7: Look at the one-year return column and filter stocks with positive returns. This is the simple momentum measure. The ideal way would be to look positive returns and max no of months with positive return. So the quality of the momentum is also good (I do this in my monthly low vol, momentum screeners). So you can use an alternative return sources that lists monthly returns as well.

Step 8: Find out stocks that have low volatility (top 30, above list) and stocks that have given a positive return in the last year. That is your low vol, momentum shortlist.

Stock Name1Y return
Tata Consultancy Services Ltd.41.27
Britannia Industries Ltd.34.99
Hindustan Unilever Ltd.31.76
Tech Mahindra Ltd.30.34
ICICI Bank Ltd.16.05
HDFC Bank Ltd.13.85
Dr. Reddy’s Laboratories Ltd.7.85
I T C Ltd.7.42
Larsen & Toubro Ltd.5.5
Procter & Gamble Hygiene & Health Care Ltd.4.94

Step 9: Make sure the impact cost of the stock is low as even in the Nifty 100 there could be ill-liquid. These are 15 stocks with highest impact cost. Best to either avoid these or have low exposure.

The New India Assurance Company Ltd.
Procter & Gamble Hygiene & Health Care Ltd.
General Insurance Corporation of India
SBI Life Insurance Company Ltd.
ABB India Ltd.
Aditya Birla Capital Ltd.
HDFC Standard Life Insurance Company Ltd.
Container Corporation of India Ltd.
Bharti Infratel Ltd.
Hindustan Zinc Ltd.
Petronet LNG Ltd.
Britannia Industries Ltd.
Oil India Ltd.
Bank of Baroda

Step 10: Also keep an eye on the free float market cap and sectors in your shortlist. You want your stocks to have a high free float market cap and from different sectors.

Step 11: If you want additional checks, you can conduct financial health checks with The freefincal Excel Stock Screener

Step 12: Repeat this process each month with new NSE monthly report files. If a stock falls out of your low volatility or low volatility and momentum list, you must not hesitate to sell and replace it. Else this method will not work.

As always please do your due diligence.

Related Viewing

The latest from freefincal @You Tube


Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps