What is the Nifty Equal Weight Index strategy?

The Nifty Equal Weight Index assigns an equal weighting to each stock within the index, unlike traditional indices where stock weight is determined by market capitalization.

Why did the Nifty Equal Weight Index outperform Nifty?

It outperformed because the underperformance or modest gains of large-cap stocks (heavyweights) had less impact on the equal-weight index's performance.

Are equal weight indices a good investment for conservative investors?

Financial planners suggest caution for conservative investors, as equal weight indices can carry concentration risk and perform best in specific market conditions.

Home / Business and Economy / Equal Weight Stocks Beat Nifty: A New Trend?

Equal Weight Stocks Beat Nifty: A New Trend?

21 Jan

•

Summary

Equal weight index returned 15.14%, outpacing Nifty's 11.63% gain.
Equal weight strategy thrives when market moves are broad, not concentrated.
Fund houses launched multiple equal weight index schemes recently.

Equal Weight Stocks Beat Nifty: A New Trend?

An index of Nifty stocks with equal weighting has demonstrated superior performance over the past year. The Nifty Equal Weight Index achieved a return of 15.14%, significantly outperforming the benchmark Nifty's 11.63% gain during the same period. This divergence is attributed to the underperformance of major blue-chip stocks, whose substantial market capitalization typically dictates the broader index's movements.

Unlike traditional market-cap-weighted indices, the Nifty Equal Weight Index allocates an equal 2% weight to each constituent stock. This structure minimizes the influence of large-cap companies. The limited impact of heavyweights like TCS, Infosys, and RIL on the benchmark's performance contributed to the equal-weight strategy's success.

In response to this trend, several fund houses have introduced new investment schemes based on equal-weight indices, including the Nifty Top 10, Nifty Top 20, Nifty 100, BSE 200, and Nifty 500 Equal Weight strategies within the last 12 to 18 months. These can serve as core holdings or tactical investments depending on an investor's risk profile and market outlook.