Aditya Birla Sun Life launches Nifty 50 Equal Weight Index Fund

Aditya Birla Sun Life Asset Management Company (AMC) added the Nifty 50 Equal Weight Index Fund to its passive investment line-up by launching Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund. This fund is an open-ended scheme that tracks the Nifty 50 Equal Weight Total Returns Index (TRI). The new fund offer (NFO) is said to remain open up to June 2, 2021, and would again re-open for subscription within five business days from the date of allotment. 

Click here to read its scheme information document (SID).

Nifty 50 Equal Weighted TRI includes all the constituents of Nifty 50 TRI. However, the only difference is with respect to the individual weights allocated to each of its constituents. Nifty 50 assigns weight to its constituents based on market capitalisation, which means that the higher the market capitalisation of a company, the higher would be its weightage in the index. However, in comparison, an equal weight index treats all of its constituents equally, irrespective of their relative market capitalisation. 

The index maintains the allocation of each constituent company at approximately 2 per cent. This results in broader sectoral representation and more diversification at a stock level. Moreover, this also helps in significantly reducing the concentration risk at an individual stock as well as at the overall sector level. The index is automatically rebalanced semi-annually in line with Nifty 50. Additionally, the portfolio is rebalanced on a quarterly basis, leading to smart and periodic profit booking. When the allocation of any stock increases as a result of market action (since each stock would be having 2 per cent allocation) then, on the rebalancing date, the excess percentage of the stock will be sold leading to an automatic profit booking. The proceeds will be re-invested into stocks, which have fallen, having an allocation of less than 2 per cent.  

Commenting on the launch of the new fund, A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC Limited said, “Equal allocation to the 50 large-cap companies can benefit from growth opportunities across the board rather than relying on the performance of a few heavyweights. With a period of broad-based economic recovery on the anvil, high growth sectors like cement & cement products, pharma, metals, and services are better represented in the Nifty 50 Equal Weight Index. Over time, as markets and the economy grow, we expect the equal-weight index (EWI) to do better than Nifty 50. It has outperformed Nifty 50 over short and long-term periods. In fact, some of the stock level polarisations in the base index that we saw in 2018-19 is already reversing sharply. In this backdrop, Aditya Birla Sun Life Nifty 50 Equal Weight Index Fund is an intelligent and simple investment option that provides an opportunity to capitalise on broad-based economic growth in the country.”