Mumbai, November 17, 2021:DSP Investment Managers on Monday conducted a bell ringing ceremony to commemorate the listing of DSP Nifty 50 Equal Weight ETF – India’s First Exchange Traded Fund based on the Nifty 50 Equal Weight Indexon the NSE. Mr. Kalpen Parekh, MD and CEO, DSP Mutual Fund, Anil Ghelani, Head – Passive Investments & Products, DSP Mutual Fund, Mukesh Agarwal – CEO – Indices and Data, NSE, Sanjiv Shah – Ex Founder of Benchmark MF were present at the bell ringing ceremony.
In an equal weight index, each stock in it gets equal weight. Thus, if the strategy is applied to Nifty 50, the equal weighted index will own the same 50 companies as Nifty 50 and will have 2% weight to each company unlike the current market cap weight design where some stocks get large weights like 9-10% and many stocks in the lower tail get only 0.3%. This gives all companies in the index an equal chance to contribute to returns rather than being overly dependent on the top 10.The DSP Equal Nifty 50 ETF, owing to its methodology, aims to provide better sector and stock diversification compared to Nifty 50 Index.
DSP has been the first mover in launching passive funds using the Equal Weight Strategy in India and we are excited to launch the first ETF tracking Nifty 50 Equal Weight Index in the country. When we studied this concept of equal weight indices globally, we noticed that over long periods equal weighting tends to earn better returns than market cap weighted indices. This happens as all the companies get chance to participate rather than just the top few. Such a strategy has its phase of underperformance when economy’s profits are polarised to select companies like in recent five years. However, over the long term as good companies across sectors grow and create value, an equal weight strategy gives meaningful weight to each company in the index. Equal weighting also ensures that the most over owned sector at any time is de risked,” says Kalpen Parekh, MD & CEO, DSP Investment Managers.
