Nifty 50 Equal Weight Index Fund, an open-ended scheme tracking the Nifty 50 Equal-Weight TR Index has been launched by Aditya Birla Sun Life AMC, with the NFO, opening on Wednesday, scheduled to close on June 2.

This equal-weight index treats all the constituents equally irrespective of their market cap, in contrast to Nifty 50, which gives higher weightage to companies with higher market cap. The index retains the allocation of the constituent companies at 2% each, reducing the concentration risk significantly at an individual stock and overall sector level. The index is automatically re-constituted every six months in line with the Nifty 50, allowing for the natural selection of top movers. Apart from that, the portfolio is rebalanced every quarter, leading to periodic profit booking. Since each stock has 2% weightage, in case any stock’s allocation increases as a result of market action, then on the rebalancing date, the excess percentage of the stock will be sold leading to an automatic profit booking. The proceeds will be re-invested into stocks that have dropped and have less than 2% allocation.

According to A Balasubramanian, Managing Director, Aditya Birla Sun Life AMC, equal allocation to 50 large-cap companies can benefit from growth opportunities across the board rather than relying on the performance of few heavyweights. With a period of broad-based economic recovery on the anvil, high growth sectors such as cement and cement products, pharma, metals, and services, are better represented in the Nifty 50 Equal Weight Index. He pointed out that as the markets and economy grow, it is expected that the Equal Weight Index to do better than Nifty 50. It has outperformed the Nifty 50 over short and long term periods and In fact, some of the stock level polarisations in the base index that we saw in 2018-19 are already reversing sharply.