Nippon India MF launches Nifty 500 Equal Weight Index Fund

Published on Aug 21, 2024 13:21

Nippon India Mutual Fund has introduced the Nippon India Nifty 500 Equal Weight Index Fund, a unique investment opportunity that provides equal exposure to each of the 500 stocks in the Nifty 500 Index.

The New Fund Offer (NFO) for the fund is open from August 21st to September 4th. The fund seeks to deliver returns that closely track the Nifty 500 Equal Weight Index.

Unlike traditional market-cap weighted indices, which give larger companies a greater influence, the Nifty 500 Equal Weight Index assigns the same weight to every constituent stock, regardless of its size. This approach aims to reduce concentration risk and offer a more diversified portfolio.

The index is divided into three segments: Large Cap (20%), Mid Cap (30%), and Small Cap (50%). The higher allocation to Mid and Small Cap stocks can potentially capture additional returns during periods of favorable market conditions.

The fund`s constituents will be reviewed and adjusted twice a year, typically in March and September, to ensure alignment with the underlying Nifty 500 index. To maintain equal weighting, the fund`s individual stock positions will be rebalanced quarterly (March, June, September, and December).

The Nifty 500 Equal Weight TRI index has demonstrated superior performance compared to its market-cap weighted counterpart, the Nifty 500 TRI. Over the past five years, the equal weight index achieved a CAGR of 30.6%, while the Nifty 500 TRI returned 22.3%. Similarly, over the past three years, the equal weight index delivered a CAGR of 25.9%, outperforming the Nifty 500 TRI`s 21% return.