Should you add equal-weight funds to your portfolio?

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The Nifty 50—India's headline stock market index—is down about 5% over the past 12 months and about 2% over the last six months. Yet a set of equal-weight index funds and exchange-traded funds (ETFs) have done better in the recent period.

For instance, an equal-weight fund tracking the Nifty 500 Equal Weight index returned about 15% over six months (as of 9 September 2026), funds tracking the Nifty 100 Equal Weight index returned around 7%, and the Nifty 50 Equal Weight-based funds are up about 2.7% over the same period.

Equal weight simply assigns the same weight to every stock in an index, instead of weighting by market capitalization. In a Nifty 50 Equal Weight index, for instance, each of the 50 stocks carries an equal 2% weight, reset back to equal every quarter—so no single stock or sector can dominate the way it can in the market-cap-weighted Nifty 50.

Equal weighting can also change the characteristics of an index. For example, the Nifty 500 Equal Weight index has 50% exposure to small-cap, 30% to mid-cap and 20% to large-caps as a result of the equal-weighting, while the parent Nifty 500 index carries close to 70% exposure to large-caps, with just 10% in small-caps and 20% in mid-caps.

These strategies have also grown gradually. Investor assets in equal-weight index funds and ETFs have seen a 10x jump—from about ₹ 140 crore at the end of 2020 to over ₹ 10,500 crore by December 2025. Several of these funds are new, but they track indices that have long historical data. Below is a look at how these strategies have performed over the long run—and whether you should invest.

Over rolling seven-year periods, these equal-weight indices have delivered average annualized returns of roughly 12-14%, and none posted a negative return over any seven-year window. The analysis is based on seven-year returns rolled daily between 11 September 2006 and 10 September 2026. This period included 3,218 observations of seven-year returns of each of the indices.

The analysis is based on total return index variants, which captures both price movements and dividend gains in the index.

That outperformance over the parent index, though, tends to move in cycles, said M. Pattabiraman, founder of Freefincal.

For instance, as the market surged in 2014 after that year's general election, the broader equal-weight indices raced well ahead of their parents—the Nifty 500 Equal Weight returned about 60% in calendar year 2014 against the Nifty 500's 39%, and the Nifty 100 Equal Weight about 42% versus the Nifty 100's 35%.

The recovery after the 2008 crash showed an even sharper divergence: from the March 2009 market bottom 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 longer periods, though, the differential versus the parent index can be wide or narrow, depending on which equal-weight index it is and the phase of the market.