Synopsis
By nature of its construct, equal weighted index offers better diversification than its market cap weighted sibling. Financial services companies take up nearly 38% of the Nifty50 index. By contrast, its equal weighted avatar only has 22% exposure to this basket.
In the sharp market rebound since last year, the frontline Nifty50 index has emerged only second best. It has been comfortably upstaged by its modified avatar—the Nifty50 Equal Weight index. The latter has gained 110% since the March 2020 lows, as compared to the 95% gain in the Nifty index. Should investors persist with the traditional index or ride its offshoot?
The equal weight index differs from the mainstream index in its composition. The
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