Factor investing leadership has shown stark divergence between global and Indian markets in 2026, with momentum dominating globally while value outperformed in India. This contrast highlights the varying market dynamics across different regions and the importance of factor-specific analysis for investors. The divergence underscores how local market conditions and investor preferences can significantly influence factor performance outcomes.
Factor investing has experienced explosive growth in India, with the combined assets under management of smart beta ETFs and index funds surging from ₹1,153 crore in June 2021 to ₹52,739 crore in June 2026, according to an Edelweiss Mutual Fund study. This represents a compound annual growth rate of more than 115%, demonstrating the rapid adoption of rule-based investment strategies over traditional market-cap-based approaches.
Momentum has consistently delivered the strongest returns across all investment horizons, with 24.9% annualised returns over 10 years, as reported by Edelweiss Mutual Fund data. The momentum factor, which invests in companies with strong recent share price performance, outperformed value at 20.2% over the same period. The 7-year performance showed momentum leading at 28.7%, followed by value, while the 5-year period was the only exception where value narrowly outpaced with 25.1% returns.
Despite delivering superior returns, momentum carries significant volatility with a 10-year standard deviation of 19.4%, according to Edelweiss Mutual Fund data. Value emerged as the riskiest factor with a 10-year standard deviation of 20.2%, followed closely by momentum. Low volatility proved to be the least risky option with a standard deviation of 11.7%, indicating significantly lower fluctuations than other strategies.
The latest market data shows strong momentum across multiple sectors, with blended revenue growth at 13.2%, marking the strongest performance since Q2 2022. As reported by recent earnings scoreboards, 77.2% of companies have reported revenue above estimates, with Energy leading at 135.3% earnings growth due to Strait of Hormuz disruptions benefiting producers and processors. The market's forward twelve-month P/E of 19.7x leaves limited valuation room for further increases, while the probability of a September Fed rate hike has risen to 62.7% according to CME FedWatch.
