Should you invest in Nifty 50 equal weight index mutual funds now? This 12-month ratio can help you decide

Nifty 50 Equal Weight Index Funds give investors balanced exposure across large-cap stocks. But with all funds in the red over the past year, should you invest or not? A simple indicator may help investors assess which strategy could suit the current phase.

Do you want to add a large-cap passive scheme to your mutual fund portfolio but are unsure whether a Nifty 50 Equal Weight Index Fund is the right choice?

Unlike a regular Nifty 50 index fund, an equal-weight fund gives all 50 stocks a similar weight, reducing the portfolio’s dependence on the largest companies.

With all the Nifty 50 and equal-weight index funds in the red over the last 1 year, investors may be wondering whether to invest now or wait. This makes it important to understand when an equal-weight strategy could work better within the large-cap segment.

DSP Mutual Fund, in a report titled “How to take advantage of Polarization & Depolarization?”, has suggested a framework investors can use to identify when the Nifty 50 Equal Weight Index Fund could benefit from a change in market leadership.

What is the polarisation and depolarisation cycle?

According to DSP, the Nifty 50 is market-cap weighted, with the top 10 stocks accounting for around 50–60% of the index. When these top stocks outperform the remaining 40 stocks, this is described as polarisation.

A depolarisation phase, on the other hand, occurs when the broader set of Nifty 50 stocks performs better than the top 10, resulting in a more broad-based rally.

“Polarization & Depolarization is cyclical in nature and are witnessed in phases. Phase of polarization is generally followed by phase of depolarization,” the report noted.

For an investor, the distinction matters because a Nifty 50 Equal Weight Index Fund is designed to provide more balanced exposure across the 50 stocks rather than concentrating heavily in the largest companies.