Nippon AMC MF launches Nifty 500 Equal Weight Index Fund: Who should invest

Fund allocates equal weight to each stock within portfolio, mitigating the concentration risk

Nippon Life India Asset Management Limited (NAM India) has launched Nippon India Nifty 500 Equal Weight Index Fund. It is an open-ended scheme that will track the Nifty 500 Equal Weight Index, providing investors with an opportunity to engage in a diversified portfolio of 500 companies.

 

The Weight Index Fund allocates equal weight to each stock within the portfolio, mitigating the concentration risk commonly associated with market-capitalisation-weighted indices and offering a balanced and unique exposure to the broader Indian market.
 

The Nippon India Nifty 500 Equal Weight Index Fund will capitalise on India's growth story by offering exposure to a wide market that includes large, mid, and smallcap companies. The fund spreads over 21 sectors, with investments in largecap (20 per cent), midcap (30 per cent) and smallcap stocks (50 per cent).

 

 

“Building upon our strong track record in passive investments, we are excited to launch the Nippon India Nifty 500 Equal Weight Index Fund. This Smart-Beta strategy adopts an equal weighting approach, in contrast to popular indices like Nifty 500, which use a market-cap weighting approach,” said Sundeep Sikka, executive director and chief executive officer of Nippon India Mutual Fund.

 

Here are details about the Nifty 500 Equal Weight Index Fund

 

Nature of scheme: An open-ended scheme replicating/tracking Nifty 500 Equal Weight Index

 

Benchmark: Nifty 500 Equal Weight TRI

Fund manager: It will be managed by Himanshu Mange

 

New fund offer opens on August 21 and will close on September 4, 2024.

 

Asset Allocation: The asset allocation strategy for this investment is focused on securities constituting the Nifty 500 Equal Weight Index, with a target allocation ranging from 95 per cent to 100 per cent of the total assets. To manage liquidity and mitigate risk, the remaining portion, between 0 per cent and 5 per cent, is allocated to cash, cash equivalents, and money market instruments, including schemes that invest in liquid securities.

Exit Load: Nil

Minimum application amount: The minimum application amount is Rs 1,000, with subsequent investments allowed in multiples of Re 1

Plans: The scheme offers following plans:

 

a) Growth Plan

b) Income distribution cum capital withdrawal plan

 

The Nippon India Nifty 500 Equal Weight Index Fund presents a "compelling opportunity" for investors to diversify their portfolios while participating in the long-term growth potential of India's diverse and dynamic market, said the company in a press release.

 

“Nippon India MF has launched the Nifty 500 Equal Weight Index Fund, which will invest in all Nifty 500 stocks in equal proportion. However, only about 20 per cent of the market cap in this index is allocated to largecaps, with 80 per cent going into mid and smallcaps. As a result, this fund primarily behaves like a smallcap-oriented fund, despite its broad market coverage,” said Shweta Rajani, head - mutual funds, Anand Rathi Wealth Limited.

 

“While index investing may save on costs, the strategy is flawed and can lead to losing out Alpha. If we compare Nifty 500 performance against the top three performers of multicap funds, they (multicap) have delivered around 55 per cent with the category delivering an average return around 47 per cent whereas Nifty 500 has delivered around 38 per cent only. Active fund managers, despite slightly higher fees, often outperform indices like the Nifty 500 and generate Alpha, making index investing less attractive," she said.