Nifty50 or Nifty50 Equal Weight?

They hold the same constituents except in different weights. 

The Nifty 50 is your traditional market cap-weighted index where each stock is allocated a weight in proportion of its free-float market cap. So HDFC Bank, after its merger with HDFC Ltd accounts for almost 14%, Reliance Industries nearly 10% and so on.


The Nifty 50 Equal Weight is an alternative weighting strategy. It includes the same 50 companies, except weighted equally. Weights are reset to equal-weight every quarter.

Same constituents but significantly different weights. Which one, the Nifty 50 or Nifty 5 Equal Weight has done better over the years? 

If one had to guess, intuitively, it’d be the market cap weighted Nifty 50 given successful mega caps automatically get a higher allocation.

Capitalmind found the comparative data had interesting things to say.

Chart shows the Nifty 50 and Nifty 50 Equal Weight equity curve

Nifty Equal Weight has done better in 15 of 24 calendar years. This is Total Returns.

Drawdowns on the market cap and equal-weight versions are not too different.

One and Three-year rolling returns indicate Equal Weight does better in out and out bull markets (e.g. 2004 – 07) and worse in indifferent years (e.g. 2018 – 20)

The table summarises the comparison:

Analysis as of 09-sep-2023

Overall Comparison Summary of Nifty 50 vs. Nifty 50 Equal Weight from June 1999 to Sep 2023 shows Equal Weight ahead on all metrics.

A few things to consider before ditching the market-cap weighted Nifty50 for its Equal Weight variant:

  • History says Equal Weight tends to do better in roaring bull markets i.e. when most stocks rise and lags in indifferent or sideways markets. Intuitive considering the largest by market cap companies tend to be dominant in their respective sectors and not affected as much
  • There are several funds and ETFs that offer exposure to the Nifty50 but only two (as of writing this) that offer exposure to the Nifty50 Equal Weight.
  • The impact of the market cap weighting cuts both ways, When the handful of those companies do well, the Nifty handily outperforms the Equal Weight. Historically, most investment managers have struggled to beat the traditional market-cap weighted benchmark index for this reason. 

Picking the Equal Weight over the Nifty 50 is like backing the underdog. But then, who doesn’t love an underdog story?

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