New Fund Offer : Nippon India Nifty 500 Equal Weight Index Fund :Nippon India Mutual Fund, one of India’s leading asset management companies, has introduced a new fund offer (NFO). The name of this new scheme is Nippon India Nifty 500 Equal Weight Index Fund. This is India’s first fund based on the Nifty 500 Equal Weight Index. In this fund, the shares of every company included in the Nifty 500 index will be given equal weightage, irrespective of its market capitalization (market cap).
What isNifty 500 Equal Weight Index?
Nifty 500 Equal Weight Index is an alternative to the more widely used traditional Nifty 500 Index. In the traditional Nifty 500 Index, the weightage of companies depends on their market capitalization, whereas in the Equal Weight Index, every company is given equal weightage, irrespective of whether the company falls in large cap, mid cap or small cap in terms of market cap. This method of investment can give a new twist to the risk-return profile of investment. Nifty 500 Equal Weight Index is re-balanced on a quarterly basis so that the weightage of each stock remains equal. This strategy provides an opportunity for diversification across various sectors and themes of the Indian economy and reduces the risk associated with market-cap-weighted indices.
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What are the features of this fund?
1. Diversification:By investing in Nippon India Nifty 500 Equal Weight Index Fund, you get the benefit of investing in 500 companies, which include large cap, mid cap and small cap companies. The big advantage of this diversification is that the fluctuations in any one stock or sector do not affect your investment much, which reduces the risk associated with the market.
2. Equal Weightage: In a traditional index, the weightage of companies is determined by their market cap. This leads to the dominance of large companies in the index. But the equal weightage strategy also invests equally in mid-cap or small-cap stocks. This gives the benefit of the performance of smaller companies that have greater growth potential.
3. Reduced Risk: By adopting an equal weighting strategy, there is no room for subjective decisions made by the fund manager regarding stock selection. This also reduces risk and makes this fund a more stable investment option.
4. Low Cost: Being a passive index fund, it is usually cheaper to manage. Lower costs can lead to better returns for investors in the long term.
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Who should invest in this fund?
Nippon India Nifty 500 Equal Weight Index Fund is a better option for those investors who want to invest in the entire spectrum of the stock market to increase diversification in the portfolio and reduce risk. As we mentioned earlier, Nifty 500 Equal Weight Index gives equal space to companies of all levels, large cap, mid cap and small cap, whereas usually small companies get less space in portfolios based on traditional index. Also, it has to be kept in mind that this fund has been placed in the “Very High” category on the ‘Riskometer’. That is, those investing in this scheme will have to be prepared for market related fluctuations.
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How to invest in this NFO?
The New Fund Offer (NFO) of Nippon India Nifty 500 Equal Weight Index Fund will open for subscription on 21 August 2024 and close on 4 September 2024. Investors can start with a minimum investment of Rs 1,000. In this NFO, investors can subscribe to both direct and regular plans. Apart from this, options of Growth and Income Distribution cum Capital Withdrawal Plan are also available in the scheme.
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Keep these things in mind before investing
The risk profile of this fund is ‘very high’ as it will have a lot of exposure to mid-cap and small-cap companies. These are generally considered to be more risky investments than large-cap stocks. Obviously, before deciding to invest in this NFO, investors should understand their risk profile well. Due to this risky nature of NFO, only those investors should invest in it who can tolerate short-term fluctuations in the market and who are willing to invest for a very long period i.e. at least 7 years or more.
