Nifty 50 Equal Weight Index funds: How are they different from Nifty 50 and should you invest in them?

In a game of chess, every piece, from pawn to queen, has unique abilities and can move in a specific way.

- Abhishek Singhal

However, a chess player has to frame an overall broad strategy, fit each piece within that, and, as a team, make the best of the unique abilities of each piece. Similarly, in investing, you have to frame an overall investment strategy, let each component contribute with its unique capabilities, and earn meaningful risk-adjusted returns at the portfolio level. The Nifty 50 Equal Weight Index funds can be best suited for such an investment strategy. In this article, we will understand the Nifty 50 equal weight index, the index funds based on it, how they differ from Nifty 50 market capitalisation index funds, performance comparison, and whether one should invest in it.

What is the Nifty 50 Equal Weight Index, and how is it different from the Nifty 50 Index? 

The Nifty 50 Equal Weight Index is an alternative weighing index derived from the parent Nifty 50 Index. It has all the 50 constituents of its parent. However, the major difference is with regard to the weightage of each company and the sectoral concentration. The Nifty 50 Equal Weight Index assigns an equal weightage of 2% to each of the 50 companies, whereas the weights of Nifty 50 Index companies are based on their market capitalisation.

Note: The weightage of Nifty 50 Index constituents and Nifty 50 Equal Weight Index constituents is as of 30th November 2023