DSP Nifty 50 Equal Weight ETF review: Why the scheme when an index fund already exists?

DSP Nifty 50 Equal Weight ETF review: Why the scheme when an index fund already exists?

A month after Edelweiss converted two of its exchange-traded funds (ETFs) to index schemes, DSP Mutual Fund has done the opposite thing. DSP Nifty 50 Equal Weight ETF (DNEWE) is being rolled out nearly four years after it had launched an index fund based on the same theme. Given the rise in retail folios in ETFs, it makes sense to offer ETFs to investors, says the fund house. According to industry data collated by DSP, between March 2020 and March 2021, the number of retail folios in ETFs (other than gold ETFs) was up 126 percent. HNI folios are up 46 percent.

The scheme

DNEWE aims to mimic the performance of the Nifty 50 Equal Weight Index (NEW50).

As the name suggests, the index gives equal weightage – 2 percent – to each of the 50 stocks in the Nifty. This is what makes DNEWE different from investing in any regular Nifty 50-based fund.

What works

The stocks in

Nifty 50

have different weights, linked to the market cap of the companies.

If the company’s stock price (and therefore market cap) has been seeing a run-up, its weightage increases and vice versa.

As each company is given a 2 percent allocation, regardless of its market