Fund Review - DSP BlackRock Equal Nifty 50 Fund
The fund will rebalance quarterly where each stock will rebalance to same allocation i.e. ~2%. Therefore, the fund will book profit from overvalued stocks and invest in undervalued stocks. Besides, the fund will reconstitute every 6 month along with Nifty 50.
Oct 06, 2017 05:10 IST others
The fund will rebalance quarterly where each stock will rebalance to same allocation i.e. ~2%. Therefore, the fund will book profit from overvalued stocks and invest in undervalued stocks. Besides, the fund will reconstitute every 6 month along with Nifty 50.
As the fund will mirror Nifty 50 Equal Weight Index, to understand the investment strategy of the fund, we need to understand how Nifty 50 Equal Weight Index and Nifty 50 are different.
No Bias
Nifty 50 Equal Weight Index follows equal weight index strategy, which means that all stocks have equal weight in the index. Therefore, smaller firms will get the same weightage similar to large firms as there is no valuation or size bias. Whereas, Nifty 50 follows free float market capitalization index strategy wherein the stocks with higher free float market capitalization gets the higher weightage in the index as compared to the smaller ones.
For example – HDFC Bank has ~9.5% weightage in Nifty 50 Index due to its large free float market capitalization, while, HDFC Bank has only ~2% weightage in Nifty 50 Equal Weight Index.
Better Sector Diversification
In Nifty 50 index, financial services have ~36% weight whereas in Nifty 50 Equal Weight Index Financial Services has ~21% weight. Thus Nifty 50 Equal Weight Index offers better sector diversification than Nifty 50.
|
Sectors |
NIFTY 50 |
NIFTY 50 Equal Weight |
|
Financial Services |
36% |
21% |
|
Energy |
14% |
15% |
|
IT |
12% |
9% |
|
Automobile |
11% |
14% |
|
Consumer Goods |
10% |
6% |
|
Pharma |
4% |
10% |
|
Metals |
4% |
8% |
|
Construction |
4% |
2% |
|
Telecom |
2% |
4% |
|
Cement & Cement Products |
2% |
6% |
|
Services |
1% |
2% |
|
Media & Entertainment |
1% |
2% |
Low Concentration Risk
|
Company Name |
Nifty 50 |
Nifty 50 Equal Weight |
|
HDFC Bank Ltd. |
9.5% |
2.1% |
|
HDFC Ltd |
7.5% |
2.2% |
|
Reliance Industries Ltd. |
7.0% |
2.4% |
|
I T C Ltd. |
6.4% |
1.8% |
|
Infosys Ltd. |
5.3% |
2.0% |
|
TOTAL |
35.7% |
10.4% |
Outperformed Nifty 50
