Pune: DSP Mutual Fund has introduced a pioneering financial product with the launch of Nifty Top 10 Equal Weight Index Fund and ETF. This new offering is set to equally invest in the top 10 companies listed on the Nifty Index by free float market capitalization.
The DSP Nifty Top 10 Equal Weight Index Fund and the DSP Nifty Top 10 Equal Weight ETF are designed to leverage the appealing valuations of these leading stocks, which, according to metrics such as price-to-earnings ratio, return on equity, and return on assets, are currently more favorable compared to the broader Nifty 50 and Nifty 500 indices.
Historical performance data reveals that the Nifty Top 10 Equal Weight Index has consistently outperformed both the Nifty 50 and Nifty 500 indices over long periods and across various rolling timeframes.
Specifically, the top 10 stocks have delivered superior returns in 9 of the last 16 years. At present, the representation of these top 10 companies in the market capitalization is at a historic low, and their recent performance has lagged behind other indices and active funds.
However, past data indicates a potential for reversal: when the three-year historical alpha is negative, future alpha for this index has often turned positive.
The quality of the portfolio is notable, with the Nifty Top 10 Equal Weight Index demonstrating a Return on Equity 1.5 times higher than that of the Nifty 500 Index.
As of FY 2024, about 49% of the profits from Nifty 50 companies are attributed to the constituents of this equal weight index. The New Fund Offer (NFO) for the DSP Nifty Top 10 Equal Weight Index Fund and ETF will be available for subscription till August 30, 2024.
Anil Ghelani, CFA, Head of Passive Investments & Products at DSP Mutual Fund, commented on the launch: “While there has been growing interest in small and mid-cap stocks, the largest and mega-cap stocks currently offer more attractive valuations.
By focusing on the top ten largest stocks with an equal weight strategy, our new index can be a valuable addition to long-term portfolios, offering stability during market downturns and the potential for superior returns over time.”
