The new fund offer (NFO) opens for subscription on October 18 and closes on October 29, after which it will be bought and sold on exchanges, the company said.
In an equal weighting index, each of its stocks gets equal weighting. For example, if the strategy is applied to the Nifty 50, the similarly weighted index would own 50 companies similar to the Nifty 50 and would have a 2% weighting for each company, unlike the current market cap weight design, where some stocks would be ranked as 9. Gets great weight. -10% and many stocks in the lower tail get only 0.3%.
This gives all companies in the index an equal chance to contribute returns instead of relying heavily on the top 10.
Kalpen Parekh, MD & CEO, DSP Investment Managers said, “DSP has been the first mover in India to launch passive funds using the equal weight strategy and we are looking forward to launch the first ETF tracking the Nifty 50 Equal Weight Index in the country. Excited for.”
“When we studied this concept of Equal Weight Index on a global scale, we observed that over the long term equal weight market capitalization yields better returns than weighted indices. This is because all companies are ranked only against the top few. get a chance to participate instead,” Parekh pointed out.
However, Parekh said such a strategy has a phase of underperformance when the economy’s profits in the recent five years are polarized to select companies.
He said that over the long term, as good companies in sectors grow and create value, an equal weighting strategy gives each company a meaningful weighting in the index.
“Equal weighting also ensures that the most owned area at any given time is risk-free,” Parekh said.
Anil Ghelani, CFA, Head – Passive Investments and Products, DSP Investment Managers, outlined strategies that take advantage of some of the market inefficiencies caused by behavioral biases.
“Equal weighting takes advantage of certain market inefficiencies caused by behavioral bias, as the strategy is not affected by over-optimism in some stocks and over-pessimism in others. Such inefficiencies tend to outperform traditional market cap-based index strategies.” Equal weighting index strategy has helped,” says Ghelani.