Smart beta strategy that straddles a line between active and passive investing, is gaining ground in India. NSE has introduced many such factor indices that are based on value, alpha, volatility and momentum. Mutual funds have also launched schemes tracking those indices. One such aggressive strategy which the Kotak Mutual Fund launched last year is Kotak Nifty Alpha 50 ETF (KNA50). Nifty Alpha 50 index measures the performance of securities listed on NSE with high alphas. The constituents of the index are the top 50 stocks in terms of high alpha, which is calculated from the trailing one-year price data. They are chosen from the top 300 companies by average free float market capitalisation and average daily turnover for the last six months. Simply put, Alpha is the excess risk adjusted return generated by the stock against the market return. The index has a diversified allocation across market capitalisations. Abhishek Bisen, Sr. Vice President & Fund Manager - Fixed Income, Kotak Mahindra AMC, says, “The universe for Alpha 50 Index is very large (300 stocks) compared to other Alpha index strategies where the universe is 100 or 200 stocks.” Given its aggressive investment strategy, it has outperformed the broader market indices with a huge margin over the long run. For instance, performance as measured by the five-year rolling return calculated from data of the last 15 years shows that the Nifty Alpha 50 TRI gave a compounded annualised return of 19 percent, while the Nifty 50 TRI delivered 11.6 percent. It is a high-risk, high-return investment strategy suitable for investors with high risk profile. Here are the small-cap stock holdings. Portfolio data is as of August 31, 2022. (Source: ACEMF) BSE HDFC Securities gave a buy call in August, while Motilal Oswal issued a neutral call on the stock. KPIT Technologies The stock of this small-cap IT player was held by 24 equity schemes, including Sundaram Multi Cap, Tata Ethical and UTI Multi Asset Fund. Angel One The stock of the stockbroking company was also held by 15 other active equity-oriented schemes. Broking firms HDFC Securities and ICICI Securities have given a buy call on the stock (based on the stock recommendation over the last three months). Gujarat Narmada Valley Fertilizers and Chemicals Two equity-oriented schemes — L&T India Value and Taurus Infrastructure, had invested in the stock of the chemical company. Suzlon Energy None of the active equity schemes that were selected for this study held the stock of this heavy electrical equipment company. HFCL The stock of this telecom infrastructure company was held by eight equity schemes of Quant AMC including Quant Active, Quant Small Cap and Quant Value Fund. Radico Khaitan This stock was held by 44 active equity schemes. However, HDFC Securities gave a sell call on the stock. Central Depository Services (India) HDFC Securities and ICICI Securities advised their clients to accumulate the stock. Sixtetn active equity mutual fund schemes had this stock in their investment portfolio. Birlasoft As on the date of the study, this stock was held by 41 active equity-oriented schemes. Broking firm Chola Wealth Direct gave a buy call in the last two months. Vardhman Textiles This stock was held by 30 actively managed equity schemes. Broking firm ICICI Direct gave a hold call on the stock in July.