Equal-weight index funds and exchange-traded funds have demonstrated superior performance compared to their market-cap-weighted counterparts in recent months. According to reports from Mint, an equal-weight fund tracking the Nifty 500 Equal Weight index returned about 15% over six months as of September 9, 2026, while funds tracking the Nifty 100 Equal Weight index returned around 7% and Nifty 50 Equal Weight-based funds are up about 2.7% over the same period. This performance comes despite the Nifty 50 being down about 5% over the past 12 months and about 2% over the last six months.
Equal weighting assigns the same weight to every stock in an index instead of weighting by market capitalization. As reported by Mint, in a Nifty 50 Equal Weight index, each of the 50 stocks carries an equal 2% weight, which is reset back to equal every quarter. This mechanism prevents any single stock or sector from dominating the way it can in the market-cap-weighted Nifty 50. The equal-weighting strategy can significantly alter index characteristics, with the Nifty 500 Equal Weight index having 50% exposure to small-cap, 30% to mid-cap and 20% to large-caps compared to the parent Nifty 500 index's close to 70% exposure to large-caps.
Investor assets in equal-weight index funds and ETFs have experienced remarkable growth, with assets jumping 10x from about ₹140 crore at the end of 2020 to over ₹10,500 crore by December 2025. According to Mint, several of these funds are new, but they track indices that have long historical data. The long-term performance analysis shows equal-weight indices have delivered average annualized returns of roughly 12-14% over rolling seven-year periods, with none posting a negative return over any seven-year window based on data from September 11, 2006 to September 10, 2026.
The outperformance of equal-weight indices tends to move in cycles, as noted by M. Pattabiraman, founder of Freefincal. During the 2014 market surge following the general election, the Nifty 500 Equal Weight returned about 60% compared to the Nifty 500's 39%, while the Nifty 100 Equal Weight about 42% versus the Nifty 100's 35%. The recovery after the 2008 crash showed even sharper divergence: from March 2009 to late 2010, the Nifty 500 Equal Weight surged about 279% against the Nifty 500's 169%, and the Nifty 50 Equal Weight about 189% versus the Nifty 50's 150%. Over rolling seven-year periods, the Nifty 100 Equal Weight and Nifty 500 Equal Weight have beaten their parents by about half a percentage point a year on average.
According to Anil Ghelani, head of passive investments at DSP Mutual Fund, a Nifty 50-based equal-weight strategy provides basic market exposure while solving concentration issues from regular market-cap-weighted indices. However, as noted by Siddharth Srivastava from Mirae Asset Mutual Fund, the universe matters most, with different equal-weight indices having very different exposure to market cap segments and sectors. Investors should consider whether they are comfortable with changes in sectoral and segment representation, and whether these align with their investment objectives and risk profile. Most equal-weight funds are suitable as satellite allocation once regular mutual fund investments are in place, except for Nifty 50 equal-weight which is a pure large-cap focused strategy.
