Nippon Life India Asset Management Limited (NAM India) has launched the Nippon India Nifty 500 Equal Weight Index Fund. It is an open-ended scheme that will track the Nifty 500 Equal Weight Index and offer investors an opportunity to participate in a diversified portfolio of 500 companies.
The Index Weighted Fund assigns equal weight to each stock within the portfolio, mitigating the concentration risk commonly associated with market-cap weighted indices and offering balanced and unique exposure to the broader Indian market.
The Nippon India Nifty 500 Equal Weight Index Fund will leverage India’s growth story by offering exposure to a broad market comprising large-cap, mid-cap and small-cap companies. The fund is spread across 21 sectors, with investments in large-cap (20%), mid-cap (30%) and small-cap (50%) stocks.
“Building on our strong track record in passive investing, we are excited to launch the Nippon India Nifty 500 Equal Weight Index Fund. This Smart-Beta strategy adopts an equal weighting approach, unlike popular indices like the Nifty 500, which use a market-cap weighting approach,” said Sundeep Sikka, CEO & MD, Nippon India Mutual Fund.
Here you will find details about the Nifty 500 Equal Weighted Index Fund
Nature of the regime: An open-ended scheme that replicates/tracks the Nifty 500 Equal Weight Index
Benchmark: Nifty 500 tricycle of equal weight
Fund Manager: It will be managed by Himanshu Mange
The new fund offering opens on August 21 and closes on September 4, 2024.
Asset Allocation: The asset allocation strategy for this investment is focused on securities that constitute the Nifty 500 Equal Weight Index, with a target allocation ranging between 95 and 100 per cent of total assets. To manage liquidity and mitigate risk, the remaining portion, between 0 and 5 per cent, is allocated to cash, cash equivalents and money market instruments, including schemes that invest in liquid securities.
Output load: Null
Minimum application amount: The minimum application amount is Rs 1,000, with subsequent investments allowed in multiples of Rs 1.
Plans: The plan offers the following plans:
a) Growth plan
b) Income distribution and capital withdrawal plan
The Nippon India Nifty 500 Equal Weight Index Fund presents an “attractive opportunity” for investors to diversify their portfolios while participating in the long-term growth potential of India’s diverse and dynamic market, the company said 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 capitalisation in this index is allocated to large-cap stocks, and 80 per cent is allocated to mid-cap and small-cap stocks. As a result, this fund primarily behaves like a small-cap oriented fund, despite its broad market coverage,” said Shweta Rajani, Head – Mutual Funds, Anand Rathi Wealth Limited.
“While index investing can save costs, the strategy is flawed and can lead to losing alpha. If we compare the performance of the Nifty 500 with the top three performing multi-cap funds, they (multi-caps) have generated around 55 per cent, and the category has generated an average return of around 47 per cent, while the Nifty 500 has generated only around 38 per cent. Active fund managers, despite having slightly higher fees, often outperform indices like the Nifty 500 and generate alpha, making index investing less attractive,” he said.
First published: August 21, 2024 | 5:00 pm IS
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