Widening the stock pool, not the signal, gave this hedged low-volatility test a positive decade
Can a basket of India's calmest stocks, paired with a partial short on the index, make money in every kind of year? Strota put that question to a decade of Indian equity data. In the test, the answer came back yes: ten calendar years examined, ten of them positive after costs.
That result did not come from a clever new signal. It came from one dull change to where the stocks were picked from. An earlier version of the study drew its low-volatility names only from the hundred most heavily traded stocks on the market. Widening that pool to the whole Nifty 500 was enough to flip the record from good-with-a-bad-patch to positive throughout.
Year by year, net of fees, the tested returns ran 29% in 2017, 14% in 2018, 16% in 2019, 30% in 2020, 28% in 2021, 9% in 2022, 31% in 2023 and 21% in 2024. The last two years in the window, 2025 and 2026, landed flat — not losses, but not gains either. Across the full stretch the annualised figure worked out to 19%, with a Sharpe ratio — return measured against the bumpiness of getting it — of 1.86.
Evenness matters as much as the average here, and it is where the wider pool paid off most clearly. Strota tracks how lopsided a long-run result is: how much of the whole thing rests on its strongest stretch rather than being spread across the sample. On the narrower pool that measure sat at 51%. On the full Nifty 500 it fell to 34%, and the standout years of 2023 and 2024 stopped being standouts. A backtest that owes half its life to two good years is a different animal from one that grinds out something in most of them.
Here is what was actually held. Twenty stocks, chosen as the least volatile in the Nifty 500 that cleared a turnover floor of ₹5 crore a day, weighted equally, with the list refreshed weekly. Positions were taken in the cash segment and carried overnight. Against that sat a short position in the Nifty index itself, sized at half the value of the stock book and held only during the trading day. Brokerage, taxes and the other frictions of doing this in India were deducted before any of the numbers above were recorded.
Why should casting a wider net help at all? Because the hundred most-traded stocks are not the market's quietest ones. Searching all 500 turns up the genuine defensives — names like Marico, Britannia, Abbott, Pidilite, Castrol, Patanjali and Biocon, sitting alongside the usual ITC, HUL and Nestlé. Assembled together, that group moves less than the narrower list did and spreads its bets across more of the economy.
An obvious objection is that a low-volatility screen over a broad universe just ends up owning thinly traded stocks whose prices look calm because nobody is trading them. Strota checked. The names the screen holds today have a median turnover, measured over the past twenty sessions, of about ₹231 crore a day. These are liquid stocks, not sleepy ones, so the smoothness is not an artefact of nothing happening.
Now the part that matters more than any of the above. Strota's own note on this study separates two claims, and only one of them survives scrutiny. The structural claim — that broadening the selection pool makes the return stream steadier and less dependent on a lucky year or two — looks clean and is the reason the change was made. The level of return is a different story, and the study flags it as inflated.
Two distortions are named. The first is survivorship bias: the universe is today's Nifty 500, so every company that stumbled out of the index over the decade is quietly missing from the history, and the surviving list looks better than the real one an investor could have picked in 2017. The second is subtler. Positions are marked at opening and closing prices that a real order would struggle to get, which lets the test bank an overnight drift that a live account may never see. Strota's own expectation is that a real, executed version earns a fraction of the tested figure.
A tuning detail underlines how thin the perfect record is. Raising the hedge slightly pushed the Sharpe ratio up to 1.95 — nominally better — but tipped 2025 just under the line into a small negative. Move one dial and the headline claim of an unbroken run breaks. That is worth knowing about any statistic built on a clean sweep of years: it is often one setting away from not being clean.
Worth reading the flat years honestly too. In 2025 and 2026 the tested strategy neither gained nor lost meaningfully. The design treads water when conditions turn against it rather than profiting from the turn; the hedge cushions rather than reverses. Anyone reading a ten-for-ten record as ten years of steady compounding has the wrong picture of the last two.
What would settle it is not more history. Strota's stated arbiter is a forward paper test with realistic fills, where the overnight marks and the survivorship flattery both stop applying, and the strategy either keeps its shape or does not. Until that runs, the finding to carry away is narrow and specific: how you draw the selection universe changed the character of this strategy's returns far more than any tweak to the signal did — and a backtested track record, however even it looks, is a description of a past that has already happened.
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