Deconstructing the Motilal Oswal Value Index (MOVI)

Published on / By M. Pattabiraman Twitter: @pattufreefincal / 3 Comments

Published: July 5, 2016 at 8:13 am

Last Updated on December 18, 2021

The Motilal Oswal Value Index (MOVI) allows the investor to change equity and fixed income levels as per MOVI values. In this post, I try to understand how the MOVI is calculated.

This is only an academic post about the MOVI and is neither a recommendation to use MOVI or Motilal Oswal Mutual Funds.

MOVI-based indexing is a form of dynamic asset allocation. There are funds like

  • Franklin PE-based fund which uses only PE levels.
  • IDFC Dynamic Equity Fund that uses a combination of PE and 200-day moving averages.
  • DSP BR dynamic asset allocation fund which uses Yield Gap
  • Other funds can be found here: Performance of Dynamic Asset Allocation Mutual Funds

How the MOVI is calculated

Information on this is quite sketchy. All we know is that it is a combination of the Nifty PE, PB and Dividend Yield. The 90-day moving average of the MOVI is used for dynamic asset allocation.

MOVI Chart

Movi-chart
Screenshot from MO AMC

I have tried to come up with a formula for the MOVI by looking at the above chart and using Nifty PE,PB and DY values.

My guess (not a random one) is, the MOVI has a form which is similar to

MOVI ~ LOG((PE+PB)/DY). Where the Log stands for Logarithm and ~ stands for ‘approximately’.

MOVI-guess-formula

The overall behaviour is very close to the actual MOVI chart, by are higher by about 1.3-1.5 times. This guess formula is good enough to come up with an independent asset allocation strategy. However, that is not quite necessary as we have the actual MOVI itself!

This is a better MOVI chart

Movi-chart.-2jpg
Source: Why Movi?

The asset allocation matrix as per MOVI levels is given below.

Movi-asset-allocation

The MOVI-based strategy or any of the other strategies noted above is likely to result in a better risk-adjusted return. It may not always result in a better absolute return, as this comprehensive study shows: Is it possible to time the market?

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Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation to promote unbiased, commission-free investment advice.
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