Two routes to the Nifty 50

Summary: Two funds. Same 50 stocks. Over the past year, one lost money and the other gained more than 8 per cent. The difference has nothing to do with what they own and everything to do with one structural choice made at the start.

Two indices can own exactly the same 50 stocks and still hand investors very different returns. Over the past year, one of them lost money while the other gained more than 8 per cent, without a single stock to tell them apart. The difference is not in what they own. It is in how much of each they own.

The Nifty 50 and the Nifty 50 Equal Weight are the cleanest examples of this in the Indian market. Same 50 companies, same reconstitution schedule, same universe, yet different in a crucial way. The table titled “Same cast, different roles” below highlights what sets them apart.

The different weighting rules result in very different portfolio concentration. While the Nifty 50 is dominated by a handful of heavyweight stocks, the Equal Weight Index spreads exposure almost evenly across all 50 constituents. This is evident in the visual titled “The top 10 steal the show”.

The top 10 stocks account for more than half of the Nifty 50, while the bottom 10 together contribute less than 7 per cent. In contrast, every group of 10 stocks contributes roughly one-fifth of the Equal Weight index.

Weights shape returns

As of July 24, 2026, the Nifty 50 delivered a one-year return of -2.3 per cent, while the Equal Weight index returned 8.2 per cent. Over the last three years, the gap was equally notable: 6.7 per cent per annum for the Nifty 50 versus 14.0 per cent for the Equal Weight index.

This difference is purely the result of how much importance each stock receives in the portfolio.

To understand this better, we analysed the 43 stocks that remained part of the Nifty 50 throughout the last three years. These stocks were grouped into four quartiles based on their three-year returns, and we compared their average weights in both indices.

The Equal Weight index allocated more to the best-performing group of stocks and relatively less to the weakest performers. The Nifty 50, meanwhile, had a much larger allocation to the weakest-returning quartile because several heavyweight constituents underperformed during this period. The lesson is straightforward: when the largest companies struggle while the rest of the market performs well, the Equal Weight index has an advantage because it relies less on a handful of heavyweights.

Recent performance, however, tells only part of the story. When the heavyweights are the ones doing the work, the same arithmetic runs in reverse.

That is exactly what happened between January 2017 and January 2020. During this three-year period, the Nifty 50 TRI delivered an annualised return of 15.7 per cent, compared with 8.2 per cent for the Nifty 50 Equal Weight TRI.

The reason was simple. Among the 40 stocks that remained in the index throughout the period, the top 10 stocks (by weight) generated an average annualised return of 24.2 per cent, while the remaining 30 stocks returned just 3.9 per cent. With the Nifty 50 assigning much higher weights to these outperforming heavyweights, it comfortably outpaced its Equal Weight counterpart.

So neither index remains the winner all the time. Their relative performance depends on where market leadership lies.

What the long record says

Neither run tells you much on its own. The five-year rolling return series does more work, because it asks the question an actual investor faces: what happened to money left in each index across every possible five-year stretch? The visual titled “The lead keeps changing hands” compares the five-year rolling returns of the two indices since 2011.

Although the Equal Weight index has outperformed over the last few years, it has not consistently stayed ahead.

Over the last 15 years, the Nifty 50 outperformed in 58 per cent of five-year rolling periods, while the Equal Weight index led in 42 per cent. More importantly, their average five-year rolling returns have been almost identical 12.1 per cent for the Nifty 50 and 12.3 per cent for the Equal Weight index. Despite taking different paths, both indices have delivered quite similar long-term outcomes.

So, which one should you choose?

If recent returns are the only consideration, the Equal Weight index may seem like the obvious choice. But recent winners do not remain winners forever. History shows that leadership alternates: when heavyweight companies dominate, the Nifty 50 tends to lead; when performance broadens beyond a few large stocks, the Equal Weight index benefits.

Since their long-term return difference has been negligible, the choice is less about maximising returns and more about the type of exposure you want.

Practically, the two are closer than their structures suggest. During the sharp market fall of 2020, the Equal Weight index fell no more than half a percentage point more than the Nifty 50, so its broader spread did not result in a materially deeper decline. Its fixed equal-weight mandate does lead to marginally higher tracking error and tracking difference, as winners are trimmed and laggards topped up at each rebalance. But with all 50 constituents being large and liquid, this is not a meaningful concern.

Choose the Nifty 50 if you want market-like exposure with larger companies carrying larger weights, or the Nifty 50 Equal Weight if you want slightly more aggressive exposure while still owning India’s largest companies.

However, if you already own either index, there is little reason to switch based on recent outperformance, as both hold the same companies and have delivered similar long-term results.

This article was originally published on August 20, 2026.